The stupefying essence of Eta's cause: Basque good, Spanish bad. And that's about it...

George Orwell defined nationalism as "the habit of assuming that human beings can be classified like insects and that whole blocks of millions or tens of millions of people can be confidently labelled 'good' or 'bad'". For Eta, if indeed they rather than Al-Qa'ida are to blame, the bad insects are the 38 million citizens of Spain who happen not to be Basque.

What is truly stupefying about the Eta separatist cause is that it boils down to no more than this: Basque good, Spanish bad. There is no terrorist war anywhere in the world more devoid of anything resembling logic, let alone justification.

To be born Basque these days is to be one of the blessed of the earth. The Basques have never had it so good. The same goes for the Spanish as a whole, who have never in their history experienced prosperity and freedom on such a scale as today. Cover stories on Spain in Time and Newsweek over the past month have raved about "the Spanish miracle" and have identified Spain's economy as the model that the rest of Europe should be imitating.

What holds true for Spain holds even more true for the two million people who inhabit the little slip of land, a 10th of the size of the Republic of Ireland, called the Basque country. They are better off than anybody. The economic indicators are the same as they are in Catalonia, traditionally the wealthiest region of Spain, but where it leaps ahead is in social services and public amenities. The Basque health service is the best in Spain; the roads are the best in Spain; the amount of public money spent on education and the arts is unmatched in the rest of Spain.

Fly to Bilbao, the biggest city in the Basque country, and you will be struck by the affluence as soon as youget off the plane. Bilbao airport, inaugurated three and a half years ago, is a wonder to behold, the work of Santiago Calatrava, the Valencian architect who is now reshaping downtown Manhattan, where the World Trade Centre used to be. In Bilbao itself you have Frank Gehry's Guggenheim Museum, perhaps the most stunning monument built in Europe since the Eiffel Tower, as well as a state-of- the-art underground system designed by Norman Foster.

These people are not struggling. Even before the Basque boom of the past 10 years, life in the Basque country was sweet. Spain is an arid country for the most part, but the Basque country is green and lush: lowland Switzerland, but with more sun. The food in the Basque country is the best in Spain. San Sebastian, where you could spend a month trying to find a place that served mediocre food and fail, is Spain's most elegant, most beautifully situated city.

Ah, yes, some Eta sympathiser might cry, but what good does it do you to have all the riches of the earth if you do not possess freedom? What about the Basque soul?

Well, yes, indeed, one might then respond to, say, Arnaldo Otegi, the leader of Eta's political wing, Batasuna. Let us examine this question of Basque freedom, this independence Eta thinks is worth killing for. Since the death of Franco - under whom they did indeed suffer, as did lots of other Spaniards - the Basques have accumulated more and more autonomous power. So much so that it is hard to see what more they could reasonably want.

They have their own parliament; they raise their own taxes; they spend their own tax income; they have their own police force; they run their own health and education systems. And they have, in abundance, all those symbols so dear to nationalists everywhere: the flags (in this case a green and red version of the Union Jack), the street names and the language.

Euskera, the Basque language, is now the principal means of instruction in Basque schools. State schools are allowed to teach in Spanish, but they are punished for it by receiving minimal subsidies compared to those of schools that teach in the mother tongue. Just for good measure, theatre, films and other cultural events conducted in the Euskera also receive all manner of state subsidies.

Ah, yes, say the Otegis, but what about our bully of a neighbour, the long shadow of Spain under which we are condemned to live? It is only once we have shed the yoke of the neighbouring kingdom that we shall be truly free.

The counties of Surrey and Kent suffer more from the jackboot of central government than the Basques do. And this is where the demented core of the whole problem lies.

Imagine terrorist cells emerging in Guildford and Sevenoaks, bent on slaughtering Labour and Tory politicians, bobbies on the beat and people on trains; and doing so driven by a passion to secede from the rest of England. That is what Eta is all about - madness masquerading as liberation struggle.

I have spent time with the Batasuna crowd. I have sat in bars with pretty university students and their handsome, well-dressed, well-off boyfriends and heard them talk about the repression they are obliged to live under, the denial of their right to exist as a free and sovereign nation. It is the rhetoric of university activists in South Africa in the mid-1980s, of Sandinista guerrillas before the fall of Somoza. It is absolutely insane. And it is from these people, whose very sense of identity is defined by these fantasies, that the ranks of Eta are filled.

What makes this whole thing even more perverse is that those responsible for curtailing basic freedoms in the Basque country are Eta and Batasuna. Ordinary people - and the majority of ordinary Basque people will have viewed yesterday's Madrid massacre with disgust - live in fear of expressing support for the Spanish state's ruling Popular Party or for the main Socialist opposition. Journalists working on national newspapers, such as El Pais or El Mundo, live in fear of their lives. More than 50 journalists in the Basque country have permanent bodyguard protection - and it is not the Civil Guard that they are afraid of.

How has this nationalist fundamentalism taken root in a modern country that has the eighth-largest economy in the world? Orwell, in his Notes on Nationalism, probably puts his finger on it when he says that "some nationalists are not far from schizophrenia, living quite happily amid dreams... which have no connection with the physical world".

These Eta types live in a bubble; a closed, self-referential world where they are free to feed their fantasies and build up their fear and loathing for the "insects" of Spain, whom they do in truth see as inferior. Batasuna supporters, while purporting to be politically progressive, have reflexively described Spaniards as short, dark, hairy people, whose brains are less evolved than the Basques'.

People, especially on the worthy left, talk of the need to negotiate with Eta. You can't. The problem is not political, it is mental. These people are in the grip of a collective paranoia: obsessively competitive with, and fearful of, their neighbours; indifferent to, or unaware of, objective truth.

In such a state, pity, as Orwell writes, ceases to function. Loyalty to the cause, in this case a fabricated abstract that bears no relation to the real world, is the paramount virtue. Taken to extremes - and they have never been taken to such extremes before - such a way of thinking, if thinking if the right word, leads to the slaughter of 190 people who were minding their own business one morning on their way to work.