Jon Cruddas: How did we become the party of the establishment?

It is time for the left to take on the New Conservatives. This challenge cannot be separated from the need to address the problems facing post-New Labour social democracy. By critically engaging with David Cameron's Conservatives, the left can rethink its principles and renew itself.

The New Labour project is exhausted. Its promise of change in 1997 was greeted with optimism – "things can only get better". A decade on, that change has become associated with the turbulence of global capitalism – fear of immigration and economic insecurity. New Labour has created a more individualised and wealthier society but not a freer or more equal one. In its neglect of its core working-class support it has lost its roots and ideological purpose. Despite its extraordinary electoral successes it has failed to build a lasting coalition for transformational change.

With the onset of a recession, Britain faces acute problems in creating a more equal society. As Oliver Letwin argues: "The social revolution we now need to achieve is as great as the economic revolution... required in the 1980s and 1990s. Mr Cameron has made the theme of "Breakdown Britain" central to his politics, saying: "The greatest challenge of the 1970s and 1980s was economic revival. The great challenge in this decade and the next is social revival."

Labour's response to this pro-social rhetoric has been dismissive but it offers no coherent alternative. In its reinvention in the 1990s, New Labour jettisoned the language of ethical socialism and so lost its capacity to match Mr Cameron's pro-social rhetoric and usurp his claim to value politics. In contrast, Mr Cameron's ethical language of social life has resonated amongst many who in the past would never have considered voting for the economic liberalism of Thatcherism.

But how much has the Conservative Party changed? The New Conservatives have cultivated an aura of intellectual ferment and political renascence. However the ferment remains shallow and narrowly defined. Old prejudices remain. Despite Mr Cameron's early bold politics, the New Conservatives cannot find a way out of the orthodoxies of the 1990s. They have no coherent political economy with which to enact their pro-social politics and rhetoric of social justice. As an election approaches, the instinct is to retreat from the search for a new political paradigm.

Labour cannot easily exploit this contradiction because neoliberal economics has been its own blind faith. Nowhere is the Government's failure to counter the New Conservatives more abject than in the field of welfare reform, where the Conservatives praise it for promoting one of their main electoral themes. And while Labour has rightly challenged the idea of a "welfare society" with its devolution of state functions, its own centralising instincts and micromanagement of people have allowed the Conservatives to strike a popular chord with their criticism of state control.

Despite its currently robust public face, the New Conservatism remains a tentative political project. Its success has much to do with Labour's political failure. In the 1990s, New Labour incorporated economic liberalism into its politics and so redefined social democracy. It repositioned itself to the right, adopted a more populist authoritarian tone and defeated the Tory party of Thatcherism. But what was New Labour's electoral strength then has now become its weakness. It has become both the party of the establishment and the party of insecurity.

Security is the new progressive politics, trust in people the new political virtue. The New Conservatism lays claim to both and Labour offers no coherent alternative. Whether or not the Conservatives win the next election, the future does not belong to the Conservative Party. Right now it belongs to a social democracy that is willing to bring liberal free market capitalism and corporate power back under control. The debate is about how we secure this post-neo-liberal politics.

The left needs to recover its ethical socialism and commitment to equality. There has to be a renewed argument for constitutional and electoral reform and the protection and extension of individual civil liberties. The conditions for trade unionism have to be improved and a new internationalism established. Perhaps most of all, and most difficult, the left needs an ecologically sustainable, pro-social political economy capable of generating both wealth and equitable development. The future is for the left to lose.

Jon Cruddas is the Labour MP for Dagenham in Essex