A CHARACTERISTIC feature of the liberal secular mind is that it struggles to understand both tragedy and paradox. Nowhere has this been more apparent than in the response of both liberal economists and state socialists to the financial crash of 2008. For both, the problem was fundamentally about money. The question has been whether to spend more or less of it to solve what they perceive as a technical problem.

For the Left (Syriza in Greece is a notable example), the answer to debt and deficit is more debt and deficit; and the morality of this is greatly enhanced if you are spending other people's money. For the Right, the cheating, exaggeration, and corruption exposed by the crash can be resolved only by greater deregulation and privatisation.

The language of virtue, of value, and of vocation is nowhere to be found in the analysis of the economy. The Big Society did not penetrate the banking system. Labour's stimulus package has more in common with Viagra than with sustaining long-term, stable relationships. What happens when the stimulus package wears off?

The tragedy of 2008 was that it marked the end of two big national economic dreams without any alternative to put in their place. The Labour dream of 1945 was of a nationalised economy, run in the public interest, complemented by a welfare state that would transform the lives of the poor. It turned out that nationalisation was inefficient, bureaucratic, and self-serving.

The market utopia, inaugurated in 1979, was supposed to unleash the spirit of entrepreneurialism, self-reliance, and risk-taking; but the bailout of 2008 led to the greatest transfer of wealth from poor to rich. There were no constraints on self-interest; in fact, the idea of pursuing your own interests was considered the basis of economic growth. The result was sustained and relentless vice at the heart of the economic system. People behaved in a greedy and dishonest way. Sin was a palpable reality, even if it went unrecognised by the prevailing paradigms that governed our economy and politics. There is no quick policy fix for that.

Into this void of mendacious superficiality, the Church (both Catholic and Reformed) has made its most significant political intervention for a hundred years. It is all the more powerful for being not a party-political intervention, but a contribution to the well-being of society by retrieving some forgotten ideas, carried within the Church but rejected by secular ideologies, which turn out to have a great deal more rational force than invisible hands and spending targets.

Led globally by Pope Francis, and nationally by Archbishop Welby, this intervention has tried to insert the concept of the "good" into economic calculation. In a world of rights, the idea of goodness can be quite subversive.

Built around the tradition of Catholic Social Thought which has been quietly growing since the publication of Rerum Novarum by Pope Leo XIII in 1891, it has been a challenge to Left and Right that neither took seriously, and that neither can adequately respond to. It recognises the tragic paradox that, while there is no alternative to the market, the market is no alternative.

Left to its own devices, capitalism leads to the domination of the poor by the rich, and the undermining of work in favour of the maximisation of returns on investment - which, in turn, leads to an enormous pressure to turn human beings and nature into commodities, to be sold at a price, in labour, land, and food markets.

If the only response is state intervention, that further erodes traditions of vocation, democratic association, and relationships. In utilitarian terms, caught between the individual maximiser and the collective aggregator, society as an ethical entity disappears. That is the tragedy.

When I am criticised by those in the Labour tradition in which I work for working closely with the Churches, I answer that at least people of faith do not think that the free market created the world. The Church has acted courageously in pointing out that human beings and their natural environment are not commodities. Catholic Social Thought held also to a concept of subsidiarity: of power exercised at the most local level commensurate with its fulfilment. This has been a powerful way of resisting not only state centralisation but also the centralisation of capital.

During the credit crunch, it was Archbishop Welby who highlighted the issue of usury, and proposed a constructive alternative. The banks borrowed at half a per cent, and lent to the Money Shop and Wonga at seven per cent. These, in turn, lent to their customers at five-and-a-half thousand per cent. It looks as if the poor are carrying an awful lot of the pain of restructuring. Building up credit unions and regional banks would bring capital to the regions, when it has hitherto been centralised in the City of London.

Then there is the long-neglected concept of vocation and the dignity of labour. For 30 years, people argued that technology, risk-taking, banking, even friends, generated value - anything other than labour. That is not true. Germany, with its strong apprenticeship system and regulated labour-market entry, has a stronger economy than ours. Vocation brings in tradition and self-regulation, concepts absent from our financialised economy. Good work.

And then there is the idea of a balance of interests within corporations, and the representation of the workforce, as well as consumers, on boards of directors, for some relational accountability. Someone to look in the eye when chief executives grant themselves bonuses. Good governance.

Perhaps the biggest paradox is that only when there is some awareness of sin can you begin to think about how you might be good. Nowhere is this truer than in the economy, and no institution has more experience of pointing this out than the Church. It is the basis of the Common Good.

Good is a subversive word.

Lord Glasman is an academic, social thinker, and Labour life peer; and a member of the All Party Parliamentary Group on Inclusive Growth, which this week hosted a debate on The Good Economy with a keynote speech by the Archbishop of Canterbury.