Like Brink Lindsey, whose book we looked at here, the Skidelskys see Herbert Marcuse as one of the main figures who exemplifies what went wrong.
Why did things go wrong?
The most obvious reason was the failure of Western economies to sustain the promise of general abundance. In practice, the protest movements of the 1960s were rapidly followed by the collapse of the Keynesian state on which the expectations of imminent abundance had been built. This killed off utopianism. Marcuse became a museum piece in the West (though not in Latin America) even before his death.
It is in fact a more general problem with seeing freedom as simply autonomy.
Marcuse’s fundamental error was that of all utopians: he closed his eyes to the obvious fact of “original sin.” It was this that allowed him to view all the evils attendant on sex—jealousy, pornography, sadism and so forth—as products of its repression by capitalism. Remove that repression, and sex would revert automatically to the condition of childlike innocence. This was a facile philosophy, which Freud himself never embraced. Sexual desire is bound up at its source with power and vulnerability, meaning that its regulation is not a transitory phenomenon but a basic condition of any civilized existence.
Abundance leads to many more choices and possibilties. But in its first glimmering iteration we blew it so badly that it delegitimized taking advantage of the possibilities for fifty years. It produced distintegration, rather than freedom.
And this is where so much of our general liberal approach goes wrong. Liberalism frequently erodes the very institutions that give people the ability to live meaningful lives, as Charles Murray argues.
I summed up Murray's view about the arts here: "Without some conception of the good, art tends to become vulgar". That also perhaps applies more generally, including to what the Skidelskys are saying. Without conception of the good, our wants become vulgar - unrestrained, tawdry, self-defeating - and socierty becomes vulgar - divided, skeptical, inclined to debt and short-termism. The state can crowd out the other institutions which let people seek their own good. It "drains the life out of life."
I don't think the Skidelsky's basic goods approach deals with this sufficiently.