Peter Mandelson issued a warning to the Labour left that the financial crisis did not mark a return to old policies of state control.
In an interview with the Blairite Progress magazine, the Business Secretary said it would be "absurd" to reject the entire market system because of "mistakes of regulation and personal behaviour" in the banking sector.
While the Government has taken ownership or a significant stake in a number of high street banks, he said it was not a return to the policies of state control advocated in Labour's 1983 manifesto - famously dubbed "the longest suicide note in political history".
"I think there's a danger that some see the financial and banking crisis as an opportunity to resurrect the 1983 party manifesto. It's not going to happen. We've all moved on," Lord Mandelson said.
"I don't believe what's happened is a market failure in the financial sector, I believe it's a regulatory failure."
Asked who he blamed for the crisis, he replied: "The banks and the regulators, in that order."
While the problems originated in the United States, he said banks in Britain had shown "a lack of prudence, lack of proper risk management".
Lord Mandelson rejected claims by the Tories that ultimately the Government was responsible for the problems in the UK.
"I don't see how you could attribute blame to the Government," he said.
"Nobody foresaw the endemic effect of this virus once it had entered the financial system and certainly once the analysis has been done and the policy options thought through we were ahead of the curve, as others internationally have acknowledged."
