Over the last few years, we have become familiar with the fiscal analysis of the problem. We are told that it was all about the failure to uphold the Maastricht Treaty, and the profligate spending and borrowing of Portugal, Spain, Italy and Greece. And that is certainly true, in the sense that the eurozone’s unsuitably low interest rates did allow those countries to rack up debts it is now clear that they cannot afford. But that debt problem is at least partly a function of the way the euro works, as a monetary union in which devaluation is impossible. It all boils down to unit labour costs — and unit labour costs are determined, I am afraid, by national stereotypes that have a unfortunate grain of truth.

Let us imagine that there are two factories, producing similar cars, and that one factory is German and one is Italian. Let us suppose that to assemble and spray each unit costs 1,000 euros in both factories — at least to begin with. Over time, however, history teaches us that the German factory will start to reduce unit labour costs. Without compromising quality or reliability, the German factory will start to find ways of speeding the process up. By investing in the skills of the workforce and in high-tech capital equipment, they will find a way of reducing the unit labour cost to 900 euros. At which point, the Italian factory faces a crisis. They can cut costs themselves, but without the gains in productivity – and face the risk that the car will be correspondingly shoddier and that they will be rumbled by the consumer. Or else they must face the awful reality that the more-efficiently produced German machine will start to devour their market.

Now in the old days, before the euro, there was a simple solution that allowed the Italians to keep producing cars of the same quality and to keep unit costs down. It was devaluation, and if you look at the post-war career of the lira (and just about every European currency) against the Deutschmark, you can see how it worked. As the mark appreciated, it was more expensive for Italians to buy a German car; and as the Italian currency fell, Italian cars remained a good buy in Germany. The tragedy now is that this option is closed off for the eurozone members — and look at the Italian car industry.

Manufacturers can no longer use the lira to compete on price, and they are being utterly stuffed. Italian car sales fell 15.3 per cent in December, while sales of German cars grew 8.8 per cent. The Italians now produce fewer cars than we do, and their markets are being relentlessly gobbled by Audis and Beemers and other beautifully engineered machines from Germany. None of this is in any way to disparage the post-war German achievement; indeed, it can be taken as an argument that we other European countries should have learnt to be much more like Germany.

We should have invested in skills and education, and in capital equipment, and in all the things that make the Germans so productive and that keep their unit labour costs so low. And in an ideal world the fierce teutonic discipline would now force the rest of Europe to shape up, in the way that Angela Merkel described in her bracing speech in Davos. Over a few decades, that is indeed what might happen. The hard necessity of slugging it out toe to toe with German workers might eventually transform the productivity of the Italians and others, so that they matched the Germans in sheer focus and efficiency and all-round Vorsprung durch Technik. The trouble is that this extra pressure is being placed on the eurozone periphery countries, at exactly the moment when Europe as a whole is facing a massive double-squeeze.

The challenge of Asia means that European welfare, pensions and employment standards will be increasingly hard to sustain, and the straitjacket of the euro is preventing the periphery countries from devaluing and going for growth; so more people are thrown out of work, welfare bills rise, debts grow — and Brussels demands more austerity, in a vicious circle of pain. All the while, German exports power ahead. The price of splitting up the euro may indeed be tremendous. But what is the long-term cost of keeping it together?

These countries are seeing huge increases in living standards, female emancipation, literacy and per capita GDP. Let Ed explain to them how they have been getting it wrong, and that it is time for them to acquire some western labour-market rigidities. He can tell them all about the clever way we do things here, with massive unfunded pension liabilities, and a welfare system that acts as a disincentive to work, and a labyrinthine grievance culture that makes it virtually impossible to dismiss anyone without being sued for discrimination of one kind or another.

He can tell them how wonderful it is for small businesses constantly to be hit by non-wage costs such as months and months of paternity leave. They don’t have that kind of thing in the Asian dynamos – and that is why they are so much more competitive. But if Ed can show them the way, perhaps they will acquire this baggage, and give the poor old UK competition a breather.

Well, what do you think? Will it work? One day I have no doubt that non-wage costs will be higher in China than they are today, as China’s rulers respond to the growing inequality in their society. Perhaps one day there will be a kind of global social charter, of the kind that Jacques Delors used to campaign for all those years ago, with a general partnership role for government in business of all kinds. But I don’t see it happening any time soon.

China and India have a combined population of 2.4 billion, with a middle class increasingly avid for possessions and status. They get up early; they work hard. The bourgeoisie knows the vital importance of inculcating their offspring with an understanding of science and maths. If you want to see the results of this culture of mental exertion, look at the first-class honours attained in some of our best universities, or the scholarship houses of leading fee-paying schools. One day in 40 or 50 years’ time we may well have persuaded them to go down our route, and once again festoon their economies with costly regulation; but in the meantime we need to compete.

Instead of hoping that they will acquire our debilities, we need to learn from their success. In making their seismic conversion to free-market capitalism, they have adopted a culture that rewards hard work, where taxes are kept as low as possible, where it is possible to create jobs easily, where governments zealously guard their own economic independence and where there is a clear recognition of the role of ambitious infrastructure projects in creating growth and long-term competitiveness. That is a lesson that I have no doubt the Chancellor will be spelling out to the Tory conference today.

Just as the world’s most successful economies are moving in one direction, it looks as if Miliband wants to go the other way. I am still not quite clear how he wants to restrain capitalism and attack the profit-motive; but all I can say is that it will only work if we could take China, India and the rest of the emerging market economies with us. There is a growing media-political view that free-market economics have somehow failed us, and that capitalism must be transformed by a new partnership with the state.

That is not the view of billions of people around the world, whose lives have been transformed in recent decades by escaping state economic control.

We are asked to call the years-before-the-event-we-cannot-mention BCE, or “Before Common Era”, and the years-after-the-event-we-cannot-mention “Common Era”, or CE. You should not underestimate the influence of this verdict. What the BBC decides, all kinds of other publishers and broadcasters will decide to follow. Schools will snap into line, and if people protest they will be told that they are following best practice – it’s what the BBC does, after all.

So this is not some trivial bureaucratic thing: it is a change with subtle but extensive cultural ramifications. I object, first, because no one is asking for this change. I once did a few history programmes for the Beeb, and we referred endlessly to BC/AD, and we didn’t get a single letter of complaint.

I object because no one is offended by these terms. We talked to loads of Muslim and Jewish scholars, and none batted an eye at my usage; and it is particularly mad to think that Muslims might be offended by a reference to Jesus, when he is an important figure in Islam, and when many Muslims are baffled by this country’s peculiar desire to exterminate cultural references to its Christian history. I should stress at this point that I do not object because I want to vindicate the literal truth of the Christian religion – since I am afraid my faith is like a very wonky aerial, and I sometimes find the signal pretty scratchy. I object because it is all so darned nonsensical. There was no Mr Common Era preaching a ministry in Galilee in the 1st century AD. There is no Eran religion, and no followers of Common.

There was Christ, and if the BBC doesn’t want to date events from the birth of Christ then it should abandon the Western dating system. Perhaps it should use the Buddhist calendar, which says that it is the 2,555th year since the nirvana of Lord Buddha. Perhaps it should have a version of the old Roman calendar, and declare that this is the fourth year of the fourth consulship of Silvio Berlusconi. It could say that this year was 13,400,000 or whatever since the Big Bang, or maybe the BBC should switch to the Mayan calendar and announce that 2011 is the year 1 BC – before the catastrophe that is meant to engulf the planet.

But if the BBC is going to continue to put MMXI at the end of its programmes – as I think it does – then it should have the intellectual honesty to admit that this figure was not plucked from nowhere. We don’t call it 2011 because it is 2011 years since the Chinese emperor Ai was succeeded by the Chinese emperor Ping (though it is); nor because it is 2011 years since Ovid wrote the Ars Amatoria. It is 2011 years since the (presumed) birth of Christ. I object to this change because it reflects a pathetic, hand-wringing, Lefty embarrassment about thousands of years of cultural dominance by the West.

The simple fact is that the Roman empire was programmatic of most of our modern global civilisation, and the decision by Constantine in 330 AD to make Christianity the official religion was one of the most important moments in the history of that empire. That is why we have used this system for 1,500 years and more, and that is why it is accepted in China, Japan and just about anywhere you care to mention that this is the year 2011. The BBC needs to stop spending time and money on this sort of footling political correctness. Someone needs to get out down the corridor and find the individual who passed this edict and give him or her a figurative kick in the pants. I know it sounds like a trivial thing to get worked up about, but one trivial thing leads to another. I urge all readers to get out their Basildon Bond and hit the emails – to Mark Thompson and Lord Patten. Let’s fight this Beeb drivel now.

We need a dual track policy, which recognises the role of prison in reducing crime – as Michael Howard and David Blunkett showed – but which also places a greater emphasis (as Ken Clarke is doing) on cutting the rate of re-offending through education of all kinds. We are working with the Justice Department to expand the work of the Heron unit in Feltham, where re-offending rates have been brought down from about 80 per cent to about 20 per cent. Bang them up, in other words, but turn them round, too.

Now the Treasury will rightly protest that all this is expensive; and that is why it is time to look at cheap and highly effective ways of both cutting re-offending and cutting offending in the first place. We need to look much harder at the role of alcohol in crime, and above all in violent crime.

I have talked to many London doctors over the past few years, and they have repeatedly stressed the horror and expense of the current booze culture. Go to any A and E on a Saturday night, and you will see the victims and perpetrators of drink-fuelled violence. They are being treated at considerable cost to the taxpayer, and at the moment we have very few tools – short of prison – to stop the drunken thug from going out and doing it again.

For more than a year we in London’s City Hall have been advocating a scheme that has been highly successful in America, and that needs to be tried out in London as soon as possible.

It works as follows. If you are convicted of a drink-related violent offence then you may stay out of prison – if and only if you stay off the booze. You may think this is impossible to enforce, but in South Dakota they have come up with a very effective tool. You simply require the individual to take a breath-test twice a day. You make it a condition of his (and it is normally his) parole that he must report twice a day to a police station and prove that he has not been drinking; otherwise he is arrested and locked up. And it doesn’t cost the state a thing, because you make sure that the – relatively low – cost of the breathalyser test is met by the offender.

In South Dakota they have had 16,000 people involved in the trial, and the system has been so effective in preventing repeat offending that the prison population has come down by 14 per cent. That is a big financial saving – and all from finding a way to keep the drunken thugs sober. Of course, we should continue with other programmes to get people off alcohol, of the kind that are championed by Alcohol Concern.

But this one is cheap, and it has real teeth. I have to say that we have not been lucky so far in our representations to government. Kit Malthouse, deputy mayor for policing, has encountered a certain amount of what I will politely call bureaucratic resistance.

Alcohol plays a big part in domestic violence; tough anti-alcohol measures can help bring down crime, as we have seen on public transport, where a booze ban has been accompanied by a 30 per cent fall in crime statistics. If we won’t lock them up, and we want to cut drunken violence, then sobriety tests must be part of the answer. We need to pilot the scheme now.

The sewers of London are already so full, and so much rainfall now sluices into them off the concrete and tarmac rather than sinking into the turf, that these Bazalgette interceptors are already exploding into the Thames about 50 times a year, and the discharge rate is increasing the whole time.

When Joseph Bazalgette built his remarkable system, he thought big. His sewers are still robust, and they are impressive feats of architecture and engineering. But they were designed for a city of 2.5 million people; and the population of London is now pushing eight million, and heading for nine.

In one of the crimes for which we are truly all guilty, society is now discharging an awful 50 million tons of raw sewage into the river in London alone, and unless we are bold in our plans, that figure will rise to 70 million tons in 10 years; and no matter how gutsy David Walliams may be, his future swims could well be banned by elf ’n’ safety.

When Bazalgette designed his interceptors, in response to the Great Stink of 1858, he assumed that they would only kick into action in emergencies – truly torrential downpours of a kind that happen once or twice a year. That is why it is time to recognise that we can no longer rely on Victorian capital, and why Thames Water is right to be consulting on its proposed super-sewer, known as the Thames Tideway Tunnel.

Of course, it must construct this cloaca maxima in a way that minimises hassle for local people and avoids damage to riparian beauty spots. But the basic idea is excellent, and essential. At a depth of 75 metres – below the Tube and other excavations – and with a bore the width of three buses, this huge tunnel will run winding beneath the course of the Thames from Richmond to a series of vastly improved and upgraded East End sewage works. A separate leg of the tunnel is proposed to run from Abbey Mills to the Beckton sewage plant, to end or greatly reduce the discharge into the Lee. It is a breathtakingly ambitious project, on a scale that would have attracted the approval of Brunel and Bazalgette themselves.

We have the prospect of protecting Walliams and other migratory forms of river life, such as sea-trout and salmon, and of ensuring that a much cleaner and sweeter river flows through the heart of the city. If we fail to act, we face smells and pestilence and a serious reduction in our quality of life.

This new super-sewer is the right thing to do for the environment – and it is above all the right kind of thing to do for a country still struggling to get back to growth. Never mind the supermasticated arguments about the 50p tax rate (which seem to be moving in the right direction). I know that George Osborne is also thinking about the economic stimulus that can be provided by infrastructure projects – and he is right. Big construction projects such as a supersewer generate myriad forms of employment – not just builders, but designers, architects, engineers, planners, and the list goes on. They create long-term competitiveness by making the city more pleasant to live in and move around.

And it is a mistake to think that these projects always need to be funded by the taxpayer. There are plenty of investors and wealth funds around the world who can see the potential long-term revenue streams that can be generated by investing in a significant and beneficial piece of infrastructure.

In other words, it is largely a question of vision, and of political will. It is becoming clear that this downturn could go on for so long that we need to think not just about projects that are “shovel-ready” now, but ones which could be “shovel-ready” in two, three, or five years’ time.

We are massively expanding Tube capacity, we are putting in Crossrail; but we need to go further. Even as these improvements come on stream, we will be struggling to catch up with the growth in demand. Commuter networks are jammed; Heathrow is running at 99 per cent capacity. We need Crossrail 2, and a new airport.

We can’t afford to keep muddling along and relying on historic investment. On sewers, rail, river crossings, ports and airports it is time for neo-Victorian boldness. It is the right thing for jobs now, and the right thing for this country’s long-term competitiveness.

Gaddafi thought he was quids in, and then what happens? A spot of bother with some rebels in Benghazi, a faint suggestion that his regime might be in trouble (and that he might no longer be the go-to man for oil contracts) and ka-booom! The very Brits who have been oiling up to him are now flying sorties over Tripoli and trying to kill him and his family. Yes, Gaddafi must be feeling bitter about the whole thing; and, of course, he is not alone in being cynically courted, fawned over and feted by the British establishment, and then ruthlessly vilified and attacked. Compare the fate of Gaddafi with that of, say, Sir Fred Goodwin — and all the other bankers and super-rich excrescences of the capitalist system.

It was only a few years ago that government ministers, and indeed politicians of all parties, were engaged in a protracted cringe before the wealth-generating power of the Masters of the Universe. And the bankers, in turn, became quite used to the flattery. They were put on important task forces to improve the governance of the country. They were given knighthoods for services to banking. They would sit at posh dinners with politicians beside them behaving in the manner, let us be frank, of some seductive courtesan. “You so rich! Your hedge fund so massive! Me love you long time!” And now look at the bankers, and all the other “filthy rich” characters once shamelessly extolled by Peter Mandelson. Not a day goes by without their foxholes being bombed and re-bombed by the very politicians who once sought their favour.

The country is seemingly engaged in an extraordinary repudiation of free-market capitalism. I don’t think I am dreaming, but I have read recently two pieces, in this space, by some of the conservative journalists I admire the most. One said (forgive me if I summarise) that the Left had been right all along, and that the country was plainly run by a money-grubbing cabal.

The other said (I compress) that the bankers had caused the recent riots. A brace of brilliant new Tory MPs is today arguing that corporate decisions should be invigilated by some “public protagonist” to make sure they are in the interests of the country as a whole, and not just shareholders.

Whatever the merits of these points, they were not what these characters were saying only a few years ago about bankers or wealth creation. Of course, both these transformations in attitude — towards Gaddafi and the bankers – could be connected with the change in government. They might be all to do with the replacement of creepy sucky-up Labour by noble and fearless Tories.

A cynic might say, however, that if the revolution had not begun in Benghazi it is all too likely that the oiling to Gaddafi would have continued — because that was the British economic interest. And the same lesson applies, in reverse, to the currently despised capitalists.

Sooner or later the upswing will return, and since we are unlikely to find any real alternative to free market capitalism, there will be a new bull market and a new round of speculation and a new breed of super-rich; and as soon as most people feel richer, and the squeezed middle feels less vengeful — why then the politicians will be clustering around the money-makers again, like flies around a jam jar; and as soon as it is safe to do so, they will claim that it is in the national interest to encourage wealth creation, just as it was in the national interest to go for Gaddafi’s oil deals.

It may all sound reprehensible, but I am afraid it’s called politics.

I don’t think this complaint makes these parents bad people. They aren’t crazed flagellants. They just feel angry (and a little bit ashamed) that adults have lost their authority, and they don’t know how to get it back. They look wistfully at their own childhoods, and seem to think that children used to respect adults. They remember an age when young people respected the police. So in their anxiety they reach for a single decisive solution – corporal punishment.

I can see why they say it, and indeed one of the many excellent things that Michael Gove, the Education Secretary, is doing is to make clear that parents still do have this right, within reason. And yet hardly any of us believes, surely, that the world would be a better place if we brought back the systematic flogging of young people by adults, with all its potential for abuse. In calling for these desperate expedients, these parents are telling us about their own mental state. They feel frightened of their loss of control, frightened at the aggression of young people. They want boundaries restored, and it is the job of the state to help if it can.

Yes, we need to get young people into jobs and we need to invest in apprenticeships. But it is no use upending a dumper truck of money on “regeneration” without giving young people the mental preparation to do those jobs. It used to be said that you can’t tackle the problems of education without tackling poverty. In fact, it is the other way round. You can’t tackle poverty without tackling education.

Across this country there are stories of educational transformation to rival the resurrection of English cricket. In some of the poorest parts of London there are schools that are overcoming the indices of disadvantage and producing outstanding results. Look at the number of Oxbridge entrants from Mossbourne Academy in Hackney, or the grades of the kids from Burlington Danes in Hammersmith. Yes, it is about investment in those schools, in good facilities and well-motivated teachers. But Michael Gove is right to insist it is also about a culture of discipline; of standing up when any adult walks into the room; of taking your hands out of your pockets when you are talking to an adult; of addressing your teachers with respect.

It is so much better to be demanding of these children, and to insist on high standards – even if it means being frank about failure – than to give in to the endless lazy condescension of false praise. There are all sorts of ways of teaching young people self-discipline and respect for rules, not least competitive sport – and especially cricket, where one wild swipe is usually punished with ignominy.

That is why Kate Hoey MP and London’s sports team are supporting everything from boxing and basketball to water polo, and we support grassroots cricket, too. If you want to spread the benefits of cricket to inner-city kids, can I suggest that you support the excellent charity, Chance to Shine, which for only £15 a head will give cricket lessons to young people who would otherwise never dream of even trying the game. Of course kids mainly want to play football. But doesn’t it make sense to induct them into a game at which England has shown it can triumph, as well as one where we are a chronic disappointment?

Cricket may be a small part of the answer. But it is not to be despised: you are more likely to give young people boundaries if you teach them to score them. And unless we expand inner-city cricket, the gulf will widen between two nations – the one that has the chance to play cricket, and one that doesn’t even know England is winning.

Some commentators of both Left and Right have said that the rioters were somehow impelled by a sense of moral equivalence with expense-diddling MPs and bonus-toting bankers. I am not sure that will quite do, either. Yes, it was wrong of MPs to cheat the spirit (if usually not the letter) of the system, and yes, bankers’ bonuses are often nauseating. But I simply cannot agree that Gerald Kaufman’s expense-claim for a Bang and Olufsen television has somehow triggered or legitimated the torching of property in outer London. I am afraid the explanations will turn out to be more complex and more various. Some — quite a few – were acting out of greed. Some seem to have been actuated by a feeling of power, a desire to be “noticed”. Some, especially members of gangs, were perhaps doing it because other people were doing it in other parts of London, and they did not want to be left out. Some of them were doing it for “fun”, or excitement, or because they wanted to get one over on the “feds”. Some of them were certainly relatively affluent, and the media have rightly lingered on the millionaire’s daughter and the schoolteachers who have been accused of looting.

The overwhelming majority, of course, came from the lower socio-economic groups, from the ranks of those who have been left the furthest behind; and the most recent figures I have seen suggest that 69 per cent of those charged have previous convictions. It has been said of these young people — and they say it themselves — that the world holds nothing for them, that they have no jobs, no hope and no future. In so far as that is true, it is something we can try to tackle. We can invest, we can “create” jobs, we can boost our apprenticeship programme, already standing at 30,000. But it is just not true to say that there are no jobs available. The London service economy is substantially dependent on migrant labour, much of it from eastern Europe, and employers confirm that these migrants have skillsets and a work ethic they cannot find in many native- born Londoners. Yes, these young people have been betrayed; but they have been betrayed by an educational system and family background that failed to give them discipline, or hope, or ambition, or a simple ability to tell right from wrong. We still have one in four London 11-year-olds functionally illiterate. No wonder they are angry and alienated. They need more tough love; they need mentors; they need to be taught to read, and to see the point of it; they need their gangs broken up and replaced with better alternatives — and we in City Hall will back the next Met Commissioner to help us achieve just that; and if they so much as dream of doing this again, they need to know that they will be caught and punished.

Of all the explanations for the riots, the simplest is that the police lost control in the first few hours. I am sure that with 20-20 hindsight Tim Godwin, the acting commissioner, and his colleagues would agree that some things might have been done differently. But at the moment we politicians speak with forked tongue to the police. They are servants of the law, and the law provides very little protection for any police officer who may — in the heat of the moment — cause injury to a member of the public. Take the officer who allegedly pushed poor Ian Tomlinson during the G20 riots, a motion which may have been far less violent than some that have been recommended to the police over the past few days. He is facing a charge of manslaughter. That could mean life imprisonment. We need to decide at which end of the chain of events we want to be less squeamish.

We can give the police water cannon, or else we can reassure parents that they indeed have the right to discipline their children, and we can declare that teachers are to be unambiguous figures of authority in the classroom. We can issue the police with baton rounds, or we can insist that young people will be prosecuted for swearing at an officer. We can change the law to allow the police to administer sjambok drubbings, or we adults can collectively take charge and recognise that it is up to us to give young people hope, boundaries and a moral framework. We can be less squeamish about police violence, or we can be less squeamish about the realities of young people’s needs. Of course, we could do both — and I certainly believe that robust policing is essential — but I know which is the best long-term answer.