Should politics always be dominated by economics? Should questions about how governments and voters pay for things – whether by earnings, taxes or borrowing – be settled before we consider the wider consequences?

In an anxious capitalist democracy such as Britain, with a modern history of patchy economic success and intermittent but recurring crises over public debt, the answer may seem obvious: governments and voters always need to behave in ways that fit with the market forces that shape our economy.

This is the assumption behind most of the debate about Labour and the bond markets. Pundits and politicians on the centre left as well as the right, and many mainstream economists and bond traders, all agree that whoever emerges as prime minister from the current undeclared leadership contest will have to design their spending policies according to what “the markets” – as they are called with reverent vagueness – find acceptable. As the once radical, now more conventional historian and journalist Paul Mason wrote recently: “Put simply, ‘defying the bond market’ is like trying to defy gravity.”

Such supposed reality checks have been delivered to Labour governments since at least the mid-1970s, when Jim Callaghan’s embattled administration was forced to agree to spending cuts in order to get a loan from the International Monetary Fund. Even Tony Blair’s much more secure premiership deferred nervously to free-market orthodoxies. “I hear people say we have to stop and debate globalisation,” he told the 2005 Labour conference. “You might as well debate whether autumn should follow summer. They’re not debating it in China and India.”

Yet to see current capitalism as a force of nature, which cannot be held back or made to change course by governments in any way, is to underestimate all the effort that has been required to establish and sustain this economic model: busy conservative thinktanks, countless rightwing election campaigns, endless corporate lobbying. Free-market fatalism also requires a belief in economics as a set of simple laws – rather than a complex, contested, often inexact science, full of disagreements about the importance of and relationships between different economic interests and dynamics. As the late Samuel Brittan, one of the Financial Times’ most worldly commentators, once put it to me: “All economics is a construct.”

One of the most constructed – and therefore ideologically loaded – concepts applied to today’s UK economy and politics is “stability”. Broadly speaking, the financial markets understand it to mean a relatively long-serving government that keeps spending, debt and inflation under control. Such stability, the argument goes, allows businesses and investors to plan for the long term.

A more sceptical, less credulously pro-capitalist argument could also be made about this sort of stability, however: that some business interests actually want stability so they can behave in risky, destabilising ways and then be bailed out by the government if they get into trouble, as the banks were after the financial crisis. For some free marketeers, state intervention is always wrong – until suddenly it’s not.

Stability can also be defined in many ways the financial markets don’t think about much, if at all: social stability, climate stability, consistency in the provision of public services, cohesion between the nations of the UK, the continuation of traditional party politics and the current electoral system, and of faith in democracy itself. By all these measures, the market-pleasing austerity policies often followed by British governments since 2010 have produced not stability but the opposite.

Unless Labour takes an approach to governing less hemmed in by conventional economic thinking, this spiral of instability will probably deepen. As the investment analyst Cris Sholto Heaton writes in MoneyWeek: “What Britain needs is … pro-growth, pro-business policies combined with huge investment in physical and social infrastructure … to facilitate this and address the growing anger and despair that voters feel. Gilt [bond] investors seem averse to any hint of the latter [approach]. They appear not to fully appreciate that the consequences of the failing status quo will be much more populist governments.”

Arguably ever since Margaret Thatcher’s government replaced Callaghan’s, capitalism has often worked in Britain in a more short-term way than in much of Europe and Asia. For an unpopular Labour administration to persuade the financial markets and corporate establishment that much better-funded government will be better for the country – and also for the long-term prospects of many businesses – won’t be easy. It’s the perennial problem of left-leaning governments in the more conservative capitalist countries: how to convince instinctively suspicious, sometimes tribally rightwing business interests that a more functional state and a fairer economy will produce better economic outcomes.

Yet there are signs that Labour may be about to try. Andy Burnham argues that the UK has a sluggish economy and unhappy society because people are paying too much for essentials, often provided by privatised utilities that prioritise profits, shareholders and executive pay over delivering a functional or affordable service. His argument shows the influence of the thinktank Common Wealth and other well-informed leftwing critics of the economic status quo who contributed to Labour’s thinking during the iconoclastic shadow chancellorship of John McDonnell.

Until recently, that phase had seemingly been erased from the party’s history. But with Keir Starmer government’s initial economic orthodoxy having generated paltry gains and almost no political credit, and now being overtaken by events such as the inflationary war in the Middle East, even the usually cautious chancellor, Rachel Reeves, is sounding bolder. “I will not tolerate anyone exploiting a crisis to make a quick buck off the back of hard-working people,” she says, apparently condemning exactly the way many companies operate in this country. Meanwhile, the once thoroughly Blairite Wes Streeting writes: “The centre-left’s task is not simply to speak the language of markets more fluently than the Conservatives. It is to ensure markets serve society rather than dominate it.”

With the Tories and Reform UK promising yet more austerity, despite its unpopularity, a political space is opening up for Labour – one that its biggest rivals for the left-leaning vote, the Greens, are already exploring. It’s far too early to say that the domination of British politics by conservative economics is coming to an end. But that mindset is more vulnerable than for a long time.

• Andy Beckett is a Guardian columnist