Do cheer up. There is no such thing as all bad news. Every cloud has a silver lining. Most Britons are still in work and a third of them are on secure state incomes. In the words of Rudy Giuliani, the New York mayor, after 9/11, take the kids to the park, buy a pizza, see a show.

Nor is that all. Some good things are happening. The price of oil has tumbled 40% since July. House prices are down 13% from last year. Whatever the papers imply, this is good news far more than it is bad. Those with strong nerves and some money can even buy shares that are unbelievably cheap.

Restaurants are emptying, air travel is easing and I noticed last week that central London traffic jams were strangely diminished. Soon hotels will be discounting heavily and plumbers will not cost an arm and a leg.

Yes, some people are poor and some are out of work, but not everyone; not even a majority. Keynes was right. The most important thing in a recession is for those with money to keep spending it. Those without can cite Aquinas and remember that the best things in life are free.

The greatest boon to result from the financial collapse is the end of the age of hysteria. We shall never again hear Gordon Brown inflating the dotcom bubble or boasting “the death of boom and bust”. We are free of Peter Mandelson professing himself “intensely relaxed about people getting filthy rich”. Those whose vulgar boosterism was unsuited to national leadership have been silenced.

Instead we can listen to the sweeter voice of caution. Last week on the BBC a construction executive declared “an end to the tall cranes” and a reversion to the repair and renovation of existing buildings. I cheered. The bursting of the Ken Livingstone speculative boom in London property is untrammelled good news. New commercial lettings in London and other cities have all but ceased. We must reuse what we have. The Livingstone skyscrapers, whether for bankers or luxury flats, will one day seem a carbon-guzzling turn-of-the-century blind alley, just so much froth.

Gone, too, should be the facile hyping of home ownership by housing ministers such as Yvette Cooper and Caroline Flint. Their talk of the “right” of all young people to buy a house saddled millions with debt they could not afford and with career inflexibility. In every other European country, most young adults pay rent.

The collapse of the buy-to-let market should lead to rents plummeting and people spending realistically on housing. The end of the home-ownership boom should encourage existing owners to sublet and reduce the underoccupancy that has long inflated British house prices. This is a good thing for all.

The green belt, threatened by Hazel Blears’s craven kowtowing to speculators, can breathe a sigh of relief. The government’s spurious “eco-towns” should be halted and its “pathfinder” bulldozers should fall silent across northern cities. Economy should return to the overheated property market, with builders switching to energy-saving conservation from high-cost development.

The impact of recession on government should be even more benign. Only now do we see how casually the rampant growth in revenue has led ministers to behave. There should be no more extravagant pay settlements for doctors; no more thoughtless purchase of NHS and ID-card computers; no more of the £70 billion that Labour has spent on “advice” . The death of spurious consultancy and the reassertion of civil service morale should be another gain of the recession.

Someone may even reverse Tessa Jowell’s capitulation to the International Olympic Committee over the cost of the Olympics – though sadly not Boris Johnson, the London mayor, who has gone native; £9 billion of public money cannot be justified for two weeks of sport when the exchequer is bleeding to death. Britain would gain worldwide kudos if it announced a 1940s-style austerity Games, in place of the turgid extravaganza at Stratford.

The rewards of adversity will go even deeper. The dingdong of political debate in the past two decades has depended on a dichotomy of free markets and state control. The market has had the best tunes. It has now met a cataclysm similar to that which afflicted state planning in the 1970s – if not the 1940s. Thatcherism has for quarter of a century assumed an ideological supremacy. Now it seems in ruins. From thesis and antithesis should emerge a mature synthesis.

Markets cannot be denied. They allocate resources in any enterprise economy. But markets require regulation by a controlling state. In extremis they require the confidence on which they depend to be guaranteed by the state. Citizens as taxpayers must underpin that confidence if they wish to avoid the most ruthless form of “market correction”, as now being experienced.

The age of hysteria was the converse of today’s (we hope brief) age of panic. The “mergers and acquisitions” mania that spread through almost every sector of the British economy now seems destructive and expensive. It distorted corporate incentives and made enterprise no more than the appeasement of greed. The thesis that the disruption of selling Heathrow, breaking up railways or disposing of utilities was justified by efficiency was never proven – and now looks sick. It saddled vital services with unsustainable debt. All this must surely end.

Britain will emerge from recession with manufacturing shattered. But the services on which the economy relies should be in recoverable order. The country remains a world-class supplier of hospitals, education, retailing, tourism, culture and even financial services. London is still a bolt hole for refugee and rentier alike. Its appeal to the world’s rich can only increase as its prices cool.

The age of hysteria should give way to an age of humility. The bombast of Tony Blair and his worldwide crusade for capitalist democracy – enforced with bombs and belligerence – was a counterproductive obscenity. How can we lecture Russia, China, Africa and the Muslim world when we cannot even regulate a sub-prime mortgage market? Where now the pledge to “end world poverty” or to “bring peace to the Middle East”? These presumptions were not just arrogant but absurd.

H L Mencken said practical politics was the business of “keeping the populace alarmed, and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary”. Today’s hobgoblin has been a war on terror. The credit crunch is not imaginary. It should cause government to concentrate on things that matter. It should mean no more macho distractions such as 42-day detention, extravagant surveillance and Home Office-generated anti-Muslim prejudice. There should be no more crazy defence projects and bloated security programmes. There may even be an end to the Titan prisons.

Social economists such as Richard Layard and Richard Sennett have long emphasised noneconomic gains in contributing to the good life. They point out that human happiness depends not on ever-rising incomes but on the ordering of leisure and a sense of self-worth. The downfall of the masters of the universe leaves space for the rise of the masters of realism and personal satisfaction.

These are uncertain times, but in every disaster there is good news to be found. For all Pandora’s ills that have spilt across the nation this past month, we should remember the little creature who stayed behind in that mythical box of catastrophes. Her name was hope. She was a cheery fellow.

simon.jenkins@sunday-times.co.uk

Times Recommends

• BNP can never make itself respectable
• Tories may drown in clear blue water
• Don't panic, it's just Mariah Careyensis