The skyline has always been an indicator of the state of the economy, both metaphor and embodiment of high times and low. The Empire State Building anticipated the Great Depression, Canary Wharf - and its developers' economic collapse - the early 1990s recession. Recently it was reported that in that last recession 40 per cent of architects lost their jobs, and earlier this month the superstar architect Frank Gehry's first large-scale project in this country, a residential development in Brighton, was cancelled. Once again, things are not at the heights they once were.

Nowhere was this more evident than at the Emerging Architecture Awards last week. These are the world's leading awards for young architects and, as the name suggests, perhaps the best indicator of the direction in which architecture is heading. So what should we expect on our streets?

Looking at the winners this year - an hotel in Tudela, Spain, by Emiliano López & Mónica Rivera; homes in Rudrapur, Bangladesh, by Anna Heringer with Basehabitat, Brac University and Dipshikha; and an office and shop in Santiago, Chile, by Alberto Mozó Studio - I'd say hubris, that's what. For ten years the Emerging Architecture Awards have been banging the drum for what the Swiss architect Peter Zumthor has called “slow architecture”, buildings that, like their gastronomic equivalent, are, if you like, locally produced, deeply rooted in their place, rather than blandly internationalist or show-stoppingly iconic. Their moment has come. “This is back-to-our-roots time,” says Paul Finch, the editor of The Architectural Review and chair of the awards.

“It seems that the old ways just aren't interesting any more,” says López, who is one of Spain's new generation of architects. “We find ourselves more interested in social questions than ever.” López and Rivera's prize-winning hotel in Tudela is as sharply modern and glamorous as a high-end hotel should be - its bulging windows frame drop-dead views; its elemental cubic form drapes elegantly across its minimalist grounds - yet it has a cunning approach to the extremity of its landscape - appropriately, a patch of Spain facing rapid desertification thanks to climate change. I love the perimeter wall constructed cheaply out of common-or-garden packing cases, which let cooling air in but block the desert's high winds.

This attention to materials alongside social considerations is also reflected in Heringer's housing project in Rudrapur. You can't get more locally produced than this. You can literally see where it has come from. Just beyond the site you spy great dimples in the fields where the mud for the walls has been excavated, while instead of a steel or concrete frame, the houses and community centre are strengthened with bamboo from the field beyond. Such immediacy isn't a conceit but a necessity in Bangladesh, where poverty and poor communications are rife. Why import your materials when they're down the road?

The buildings were put up by the community - specially trained for the occasion - and for the community, and contain an education centre, based on local building techniques subtly updated. Energy and hot water are provided by solar panels and a thermal heating system. Bamboo is a wonder material that we shall be seeing much more of in architecture, especially on its home turf, Asia. It is sustainable (cut it and it grows back), tough, tactile and sharply modern in shape. The runner-up, Vo Trong Nghia's bar and community centre in southern Vietnam, is made entirely from it, its hippy shagginess offset by a cool abstraction and intelligent nods to “primitive huts”.

“Architects inevitably react to the place they emerge into,” says Kevin Carmody, the co-winner last year of Emerging Architecture's rival prize, the Young Architect of the Year. He is currently designing the Hyde Park memorial to the 7/7 terrorist bombings. “A decade or two ago that was more apolitical. Architecture's issues were technical, more about engineering and style. Now they're moral.” An inevitable response, perhaps, from a generation emerging into doom and gloom, and facing some fundamental questions about the job they're doing. Is architecture about more than building trinkets for developers?

Since the 1970s, in which the optimism and moral purpose of architecture evaporated with the fall from grace of modernism, the profession has retreated into itself, shorn of power. Saving the world seemed such hard work compared with making pretty shapes, impenetrable theory or showy engineering for the new master of the universe - the free market.

Now architecture's generations X, Y and Z have not only become disillusioned with this powerlessness, but are gradually finding within themselves the confidence to bite back. It's in South America that you'll find the most cutting edge and politically attuned architecture in the world right now - and the capital of Chile, Santiago, is the epicentre. Here, Mozó's office block and shop embodies the architect's key skill - economy. The block he built on was designated, as blocks usually are in cities, for intensive development, with financial incentives from the planners to build as high as possible to maximise income on the site.

As the country's economy began to wobble, though, what Mozó built instead was a smaller, prefabricated building that can literally be taken to pieces and rebuilt elsewhere should the need to whip up a 20-storey monster in later years become pressing. He calls the technique “transivity”, a pragmatic response to urban economics. The building also cuts down its carbon footprint with its recyclability (it's astonishing sometimes how wasteful architecture can be), and by carefully calculating the form and size of its wooden laminated beams it can maximise the number from any one tree, and thereby minimise the number of trees chopped down.

Saving the world is back in fashion. Some are taking this to an extreme. “If you want to change society, don't build anything,” yelled the front cover of Icon magazine, the chief chronicler of Britain's young architects, last month, reporting on new firms less interested in building monuments for a corporate world than in questioning every aspect of what they're doing - even if that means doing themselves out of work. That's hardly the best business plan for most young architects, but what the Emerging Architecture winners this year point to is a critical attitude - think very carefully before you build, and if you have to build, tread lightly on the Earth. As the founder of the awards, Peter Davey, puts it: “Architecture ought to ennoble and enhance human life.” This is the kind of world we should be building.

Emerging Architecture is at the Royal Institute of British Architects, W1 (020-7580 5533), until Feb 28

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