The News of the World is ‘journalism’s Enron’, as a senior businessman told my colleague Stefan Stern. Like Enron, the story now compellingly unfolding is not just that of one global media concern; as with the banking crisis too, it is a parable of 21st century capitalism.

Not since Arthur Andersen, one of the world’s oldest and most respected accounting names, sank overnight in the undertow of Enron’s demise has a large going concern vaporised as quickly as the News of the World, a profitable paper with a 168-year-old history, a staff of 200 journalists and the UK’s largest Sunday circulation of 2.6 million. As a journalist from a family of journalists it pains me to say so, but Rupert Murdoch’s instinct to close the paper – as it usually has been in commercial press matters – was exactly right.

As we now know, you can get away with bugging customers, bribing policemen and suborning politicians for a surprisingly long time: but when the smell from the bodies under the Wapping floorboards reached the very selective noses of the big advertisers, the pirate ship NOTW was doomed as surely as the Titanic. As a newspaper editor, Roger Alton, now executive editor of The Times, commendably always stood up for his journalists, including me. But his attempt to blame Mumsnet for the pulling of the ads and thus the demise of the NOTW was both ludicrous and a measure of the remoteness of Planet Wapping executives from reality. It was The Guardian, of the group of which Alton had been a part, that broke the hacking story, remember, and it was only a story because hacking is a crime. Let’s reemphasize this: the News of the World has no one to blame for its demise but itself. (Question to ponder: as the Economist points out, the other UK tabloids have been uncharacteristically low-key about the phone hacking scandal – would, or could, the story have been exposed by a publicly-owned newspaper group, rather than the trust-owned Guardian?)

Journalists like to see themselves as cynical folk, and many defiantly wear the mistrust their readers hold them in as a badge of honour. With respect, they’re wrong. All businesses ultimately depend on the trust of their customers, but as the NOTW’s theatrical disappearance amply demonstrates, for newspapers it is their raison d’être. With their monopoly on news, gossip, rumour and entertainment long surrendered to racier and quicker-reacting online media, credibility and habit are the only assets they have left. Habit is a wasting asset. Credibility is the only thing that keeps them afloat; without it they’re as seaworthy as a holey lifejacket.

In truth, the air has been seeping out for decades. I haven’t yet pursued the correlation in detail, but I’d be surprised if falling newspaper print sales weren’t a pretty tight proxy for declining trust in journalism in general. In retrospect, the rot started with the advent of television. In a classic vicious circle of short-termism, faced with the loss of advertisers to the then new medium, newspapers could think of no other strategy than the slow suicide of cutting corners and going downmarket. They slashed editorial investment, shut down investigative teams and stopped following up the difficult stories. Gossip and celebrity, initially a sideline, gradually became the main focus. Not surprisingly, in this race to the bottom (led enthusiastically by Murdoch’s titles) trust, credibility and loyalty leaked away, and readership has only been propped up by ever more lurid headlines produced by – as we now know – corrupt and, let’s not mince words, criminal methods.

Many papers have become grotesque parodies of their original selves. Think of the gap between the News of the World’s proud title and the reality of what it latterly purveyed. They haven’t informed and enlightened: they have debased and trivialised. They have demeaned, exploited and cheated. Instead of measuring trust and loyalty (alas, I don’t know any UK newspaper that does), they have measured readership and paper profits, all justified by ‘we’re just giving the market what it wants’. The whole industry has been undermined by this self-induced public apathy and cynicism. The normally hard-hitting Murdoch-owned Wall Street Journal has so far barely mentioned the affair; in a recent poll 80 per cent of UK respondents said that after hackgate they no longer trusted the media to tell the truth. Journalism has sunk lower than estate agents in (as the hacks would say) the professional roll call of shame. Thanks a bunch, News of the World.

In this depressing cycle, the News of the World in particular, and newspapers in general, simply mirror the familiar death spiral of industrial-age capitalism. To boost short-term profitability (and thus their own rewards through option-based pay) executives skimp on long-term investment and and find ever sneakier ways to cheat their customers. In Umair Haque’s terminology, they pursue ‘dumb growth’, growth that doesn’t make people smarter, happier or better off, but the reverse. No growth has been dumber, and no value thinner, than that created by News Corp. Gordon Brown made this brutally clear in his BBC interview on 12 July: ‘I find it incredible that a supposedly reputable organisation made its money and produced its commercial results at the expense of ordinary people by using known criminals.’ The ‘value’ created at the NOTW was so vanishingly thin that eventually readers and advertisers saw straight through it to the noisome reality beneath. When they did, paper had no loyalty capital left to draw on. Which is why, even leaving aside the cynical political manoeuvring around BSkyB, Murdoch was right: the NOTW was only fit for wrapping chips.

The big question now is whether that also goes for parent News Corp as a whole – or whether, like the deranged Glenn Close at the end of Fatal Attraction, the apparent corpse will heave itself up for one final lunge at its attackers. For Murdoch the signs aren’t good. The Sunday Times and Sun are under suspicion, the key BSkyB deal has collapsed, at least temporarily, and a class action as well as further investigations are brewing in the US. One Wapping insider told me: ‘It’s like the politburo when Stalin died: no one knows what to do, and they’re all running around like headless chickens.’ Most important of all, the spell that Murdoch has exercised on all political parties through the supposed power of papers like the News of the World, and that he has steadily used to consolidate and extend the family media empire, must surely be broken once and for all. I never thought I’d write this sentence, but if that is the case, then for once the closure of an important, high-circulation newspaper will come to be viewed not as a blow against the wider cause of democracy, but for it.