Genius of Lancashire's 'matchstick' master: This summer's biggest exhibition reassesses the merits of LS Lowry

Despite his popularity, the art establishment has long belittled LS Lowry as a provincial hobby painter. Tate Britain's exhibition will turn such metropolitan snobbery on its head.

Contrary to the stereotype, Laurence Stephen Lowry was of middle-class, not proletarian, stock. A Tory voter, brought up in a home straining towards gentility, he collected the paintings of Dante Gabriel Rossetti and painted with the arias of Donizetti and Bellini ringing in his ears.

Although he possessed a cloth cap, in every published photograph of him, whether at his easel or pounding the Lancashire streets, he is dressed in a dark suit and tie; out of doors, he wore a trilby. His job of rent collector with the Pall Mall Property Company, which he held down for more than 40 years, placed him squarely on the capitalist side of the class barricade.

Yet it was his family's sudden tumble down the class ladder that triggered his genius.

It was in 1909, when Lowry was 21, that he, his mother Elizabeth and his father Robert moved from the salubrious greenery of Pine Grove, Victoria Park, to 117 Station Road, Pendlebury, on the north-west outskirts of Salford, on the way to Bolton and Wigan. The move was "for business reasons" – the failing finances of Robert Lowry that were to burden his family with debt after he died. His mother, a gifted classical pianist who had found the means to have her only son educated privately, had no illusions about the humiliation of the move. She "hated the mean streets, the terraced houses, the sight and sound of the busy mills", Lowry's biographer wrote. She took to her bed.

To begin with, her son felt the same way. "At first, I detested it," he said years later. "And then after a few years I got pretty interested in it and began to walk about." He described that moment of awakening many times over the years – how his eyes were opened to the landscape in which his family was now embedded. "I was with a man and he said, 'Look,' and there, I saw it. From then on I devoted myself to it. I have never tired of looking. It is always fresh."

Another time he told a BBC interviewer how, one afternoon in 1916, he missed the train from Pendlebury to Manchester. "It would be about four o'clock in the afternoon and perhaps there was some peculiar condition of the atmosphere… As I got to the top of the steps I saw the Acme Mill, a great square red block with the little cottages running in rows right up to it – and suddenly, I knew what I had to paint."

Whatever the precise occasion – or if, as is more likely, it was more a drawn-out process – this change of scene was to transform a hobby painter of modest talents who had been turned down by Manchester Municipal College of Art into the most original English figurative painter of the past century.

Lowry is also our most popular 20th-century painter – but the extreme accessibility of his work, together with the tightly circumscribed world he chose to paint, has made it easy for critics to relegate him to the status of a peculiar provincial, quite outside the currents of modern art. And they are still at it: blogging for The Guardian – the paper which, as The Manchester Guardian, was for many years his most enthusiastic backer – last November, Jonathan Jones wrote, "Lowry deserves a place in art history, but let's not go nuts. He is not some British Van Gogh… why can't Lowry just be 'the man who painted industrial Britain'?"

There are many ways to damn Lowry with faint praise. Another is to be found on the plaque adorning his final home on the edge of the Peak District: "The paintings of Lowry document the lives of ordinary people in the industrial communities of the North-West."

In a sense there's no arguing with that; yet in another it's quite wrong, and fatally limiting.

Lowry himself was in no doubt about it: he knew that, when he turned his attention from life drawings to the hellish reality in which he was immersed, something extraordinary happened. And at last that something is to get its reward, in a major exhibition entitled Lowry and the Painting of Modern Life at Tate Britain, which promises for the first time to give him his due in international terms. It is no surprise that it has taken two top-ranking foreign curators, TJ Clark and his partner Anne Wagner, to pierce the miasma of metropolitan snobbery and inverted provincialism that for the best part of a century has obscured the true worth of this compulsive and compelling artist.

One of the things that corrals British art into a dingy corner away from the continental mainstream is our lack of light: that's why so many artists headed for Cornwall, the brightest spot in a gloomy land. But Lowry made a bizarre virtue of our painful penumbras. His bleached-out skies are reflected in his bleached-out streets. Once he had discovered the colour known as flake white, which he used both for the skies and the streets, he had also discovered a unique way to paint the city. He then set about radically simplifying what he saw.

Gone from the city as he painted it were signposts, wheeled traffic, any remaining vestiges of the natural world, any mitigating features suggestive of culture and civilisation; gone, too, was conventional perspective: very often he views the city from some imaginary scaffold high above it, flattening the entire scene. All that remain are the handful of elements that were his obsessions: block-like industrial buildings, boorishly cheek-by-jowl with others far smaller, with no concern for proportion or harmony; the ubiquitous chimneys belching smoke; pools of effluent in which the buildings may be sinking; and, above all, people.

It has taken a century for critics to get to grips with Lowry's people: let's see whether Clark and Wagner are up to the job. Michael Howard, art historian and author of an authoritative tome about Lowry's work, describes his people, weirdly, as "automata". Nothing could be further from the truth. The conventional term for them is "matchstick men", so common now that it has been adopted as the name for a Salford pub. Yet that, too, is quite wrong.

The bleached sky, the white ground and the diffused light allowed Lowry to abolish shadows, which feature in none of his mature works. This in turn gave him the freedom to crowd his scenes with extraordinary numbers of people, each clearly delineated. If they really were just matchstick men or automata, how unbearably dull these paintings would be!

What is amazing, and what confounds all efforts to cram Lowry into boxes marked "pessimism" or "nostalgia", is that all these masses of people, delineated so simply and sparely, are electric with individual life. No two are alike. They are no more realistic, conventionally speaking, than the caricatures in a strip cartoon, yet each of them is alive. Try this as an experiment: look at the figures in these paintings with concentration for some minutes, then turn to look at actual people walking in the street. Suddenly they all look like Lowry people, each instinct with desire, goal, daydream or preoccupation.

The same is true of his cityscapes as a whole. Contrary to the faint praise that would pigeonhole him as a documentary painter, none of these smoky scenes is realistic. Everywhere he went he sketched, in a sketch book or on any scrap of paper that came to hand.

But he never sat with his easel in front of one particular aggregation of mills and chimneys to set it down. As he explained, he used what he had sketched as raw material for what he termed his "dreamscapes": realistic enough to convince plodding critics and curators that these were literal depictions of real landscapes, but in fact quite other than that, with preposterously large aggregations of factory buildings, with chimneys stretching to the horizon, in one case with the cooling towers of a nuclear power station surrealistically installed in the heart of a town.

Lowry was fascinated by surrealism, sometimes referring to himself jokingly as "Salvador Lowry". And in his sly, shy northern way, he was indeed a most unusual English surrealist, happy and amused (though also at times no doubt maddened and tormented) to be dismissed as "the man who painted industrial Britain".

The reason people were able to make that mistake, despite the glaring fact that his cityscapes are not realistic at all, was that, as with his minimal, dabbed human (and canine) figures, these dense urban aggregations do catch and incarnate something real and alive: they belong to dream but not to fantasy; they succeed in inhabiting both the reality we stare at dully from the tram window and the frightful dream that scares us awake. Nobody else did that. Nobody else even tried.

Salford has become a monument to Laurie Lowry, who died in 1976, while at the same time doing everything in its power to erase all traces of the landscape he made famous. The smart new Metrolink tram from central Manchester passes the Matchstick Man pub before arriving at Media Centre UK; a few steps away, across the Manchester Ship Canal, is the wildly over-expressive Lowry Centre, its porch like an outsize cattle trough, competing in already somewhat dated ostentation with the nearby Imperial War Museum North. Across from The Lowry is a shopping centre called the Lowry Outlet Mall.

And so it goes on. Near Salford Central station is the Lowry Fish Bar. Opposite the house in Pendlebury which Elizabeth so hated is Lowry Drive; behind stands the city's last remaining red brick mill, formerly Newton Mill, now re-christened Lowry Mill, offering "refurbished office space" in this "truly remarkable mill conversion". Probably more to Lowry's taste – he was known to cry with laughter at the antics of music-hall comics – is the sign stuck up in the unimproved cobbled alley behind the mill: "DANGER: if you must enter these premises uninvited will you please remove your dentures as our dogs find them difficult to digest."

Manchester may both idolise and trivialise its most celebrated artist, but at least the Lowry complex, alongside its plays and musicals, offers a permanent and rotating (though rather small) exhibition of the man's work, and actively lobbies on behalf of his reputation. Michael Simpson, head of visual arts and engagement at the Centre, tells me that it was the Lowry that made the first approaches to the Tate. "The Lowry started talking to the Tate five years ago; the first conversations came from us," he tells me.

"The show at the Tate will be a key moment for Lowry. He is hugely popular with a lot of people but hasn't managed to get accepted by the art establishment. As an artist whose work appears on a thousand chocolate boxes, he's completely outside the accepted trajectory of British art. The easiest thing is to box him off as a popular artist whose work doesn't have much to say to us. The Tate exhibition is designed to rectify that, which is why it is good that they have found such eminent academic curators: Lowry needs to be laid bare, to be tested."

One of the many misconceptions about Lowry is that he was a naïve, untrained painter. Yet although turned down by the local art school, he studied drawing and painting part-time for many years – life study in particular. Most crucially, he studied for a time with an obscure French impressionist called Adolphe Valette, known to his witty Manchester students as Mr Monsieur.

Valette, who taught life drawing at the Manchester School of Art where Lowry was a student, was the first artist to turn his attention to the wet, gritty, smoggy, metropolis in which he had landed. Lowry was loath to admit Valette's influence but Michael Howard is in no doubt about. "The most significant shaping factor on Lowry's style was undoubtedly… Valette," he writes in his monograph Lowry: a Visionary Artist. "His shift from traditional Corot-like landscapes… could only have come through his assimilation and reinvention of Valette's paintings."

The curators of the Tate Britain exhibition reach the same conclusion. "The show," says the Tate, "aims to reveal what Lowry learned from the strange symbolist townscapes of his French-born teacher… and demonstrates important parallels with late-19th and early-20th- century French painting."

Lowry's pride, and perhaps also his lack of self-confidence, led him to disavow any continental influence, thereby making it easier for him subsequently to be seen as a solitary provincial eccentric. But thanks to Valette, and thanks to Lowry's Pendlebury epiphany, he became the first British artist to devote his sustained attention to the city and the meaning of the city – and because this was already a French preoccupation, he was picked up by Parisian galleries and collectors long before London showed any interest in him. As Michael Simpson puts it, "He was accepted in Paris because French artists, unlike English ones, were interested in modern life."

Yet with Lowry's relegation by British critical watchdogs to the ranks of the popular and provincial, his international reputation failed to develop; Simpson recalls how he recently saw with excitement that Christie's had sold a Lowry to an "overseas" buyer – only to learn that it was going no further than Jersey.

Lowry painted many subjects other than the cityscapes of the industrial north. Perhaps under the inducement of his mother, who refused to have those pictures in the living-room – "It's bad enough living here without you bringing it home," she used to moan – he painted vivid scenes of sailing boats and bathers in Lytham St Annes, where they went on holiday. In his later years he turned away from the city to paint vast empty green rural landscapes and equally empty, turbulent seascapes. He made funny and disturbing drawings of the grotesque figures often found in his urban crowds, and erotic drawings of busty, puppet-like young women which were only discovered after his death.

But if Lowry is ever to get on to the international map, it is with his paintings of the industrial city that he will do so. Places like this were unknown until Britain invented them. It was to Manchester that Friedrich Engels, co-author of the Communist Manifesto, came to study the appalling conditions in which the working-class lived, predicting from his observations "the grim future of capitalism and the industrial age".

Lowry recorded all that, unflinchingly, but he also saw how humanity survived in these grim streets; how, despite poverty, deracination and the death of nature, the humanity of these people was irrepressible, erupting in fights and larks and processions as well as in the rituals of football matches and Whit Sunday. We gave the world the industrial poison; here's the antidote.

Lowry and the Painting of Modern Life is at Tate Britain, London SW1 (tate.org.uk), from 26 June to 20 October