Labour has passed from volatile crisis into New Year inertia. The party found itself left on the sideline complaining about Brexit and forewarning of the disasters to come. The attempt by the leadership to attract attention with a New Year revamp fell apart within hours of its launch. The vote on article 50 this week once more exposed Labour’s split between Labour PLP remainers, and Labour voter Leavers.

Meanwhile Theresa May has signalled the return to a more traditional Toryism. She has set out a strategic vision of a democratic, self-governing trading nation for working people. In Philadelphia she defined a global leadership role for Britain in partnership with the United States. She has seized control of Brexit and made public the outline of her bargaining position. She understands that a successful exit from Europe demands a new, fairer and more inclusive national settlement.

But she will struggle to manage an unpredictable US president and to navigate a fragmenting world order. She is limited in her room for manoeuvre by the insular mediocrity of her party. She lacks the policy tools to achieve her aim of a new social and economic settlement. The economic liberalism that her party pioneered and which has shaped three decades of globalisation and market based reform has been discredited. It offers no productive solutions to the problems of the British economy. Failure at home will undermine a strategic role for Britain abroad.

The Labour Party, despite its influx of new members, is at risk of dying a political death. Labour’s historic function is to be the party of the labour interest and to redress the balance of power between capital and labour. But it has lost its role and no longer knows what the labour interest is nor what it wants. The progressive politics formed in the period of Clinton’s New Democrats and New Labour can no longer build a winning coalition. The Labourism of its industrial past is redundant.

Labour failed to read the collapse of the post-war welfare settlement. It is failing again to understand Brexit and the end of the decades of liberal political dominance. Each time the right has beaten it. More ambitious, more curious, more intellectually confident, better funded and organised, the intellectual right has been attuned to popular sentiments. In contrast Labour does not know what its resources of renewal are, nor where to find them.

We are living in a period when the old liberal political settlement is dying. The political settlement of a new era is not yet tangible and this leads to a multitude of false starts. Many on the left believed the 2008 banking crisis would mark its beginning. It fitted the left-wing narrative of the redemptive nature of capitalist crisis. The wishful thinkers imagined it had arrived with Corbyn. But the historical rupture has come where none on the left conceived it would and many still won’t accept that it has – with the failure of its own progressive politics.

Brexit is not a reactionary moment. It is a democratic moment. Brexit has brought into question the political character of the United Kingdom, and the unitary state and constitution which holds its constituent countries together. It has brought into question Britain’s role in the world, the capacities of both its hard and soft power, and its relationship with Europe. And it has brought into question the Labour party and its historical purpose. Who are we? What kind of country do we want to be? What kind of party must Labour become to serve the country and its people?

Labour’s renewal and recovery will begin when it starts asking these questions. It will not find answers in new policy prescriptions. Nor in the idea of a progressive alliance which some see as a way around Labour’s falling vote share. And nor in the now fading enthusiasm of Corbynism. It was a reaction to the failures of Labour’s progressive politics that exaggerated and compounded everything that had gone wrong with them. Outside of its public sector professional heartlands its moral and political priorities are at odds with what matters in people’s lives. A progressive alliance is a minority, metropolitan interest not a national popular one.

The current leadership is short of ideas. What dominates is a tiny revanchist Marxism and the dried-up old bones of the hard left. The vacuum is filled by a small minority whose egalitarian identity politics sub-divides the population into categories in a hierarchy of oppression and virtue. It is a Manichean world view. In its capacity to estrange Labour’s own voters it is a Brechtian-inspired politics.

There are few attempts to steer this progressive left out of its political cul de sac. Paul Mason provides one attempt with imaginative brio but he only confirms the left’s intellectual stagnation. Marx believed he had escaped Hegel’s idealism by replacing “the Idea” with class struggle as the force driving history toward human perfection. Mason attempts to escape Marx’s failure by replacing historical materialism with the infallibility of Kondratieff’s wave theory. His elaborately theorised argument relies on the failure of the fifth wave we are currently living through. The collapse of this wave heralds the end of capitalism. But there is no regularised pattern of economic development determining the advance of human history. Mason’s immanent millenarianism ironically returns the left to early Fabianism, albeit in an accelerated form. The working class has become a social problem not a social agent. The future belongs to the digitally networked higher educated class. History will move rapidly toward human perfection by computer power.

Those who are known as moderates are silent, reluctant to venture beyond the restricting boundaries of Labour’s ossified political culture. And yet the Labour brand remains remarkably resilient. The task is to build a national popular politics around a centre ground coalition.

Labour must recast itself as a party of national renewal and reconstruct a broad national coalition around a sociologically changed labour interest. It is the only means by which it can take on populism, transcend its own cultural divisions, and regain its credibility as an opposition and a government in waiting. A national popular politics speaks for the labour interest within the culture of the nation. It means a Labour Party that represents the diversity of working people in the country defining their own interest and so their own shared common identity.

Brexit demands this kind of national popular politics. The speeches of May show that she understands this. But the Conservatives cannot speak for the popular in the national. They cannot build the necessary cross class coalition that will unite the cities with the towns and country, the north with the south. Only Labour, despite its current disastrous polling, has the historical potential to achieve this. And Britain is no longer the territorial focus of the national. It is England, the leading power in the UK that delivered Brexit. A Labour national popular politics must prioritise a new social and economic settlement for England and Wales within a more federal model of the UK. A renewed democratic settlement of the union will provide the foundation for a British strategic political and security approach to Europe and the world.

Brexit raises fundamental strategic choices about Britain’s role in the world, and so about the kind of society we want to live in. The dilemmas these choices pose are not new. They return us to the national popular debates in Churchill’s 1940 coalition government and to their denouement in the Suez crisis of 1956. The dilemmas are the same, the choices not so different.

Into and out of Europe

In 1940 Churchill defeated appeasement on both the left and right because Attlee and Labour supported him. The shires and the working class formed a national popular coalition. Attlee understood that the labour interest and the national interest were indivisible. Labour’s contribution to the war effort ensured its historic post war victory. It completed the job of the 1906 Liberal government and constructed a new social settlement in the country. At the same time it sought a new strategic role in the post war world.

In January 1948 foreign secretary Ernest Bevin circulated four secret memos to the cabinet. The first was headed “The First Aim of British Foreign Policy” and it outlined how Britain should seek the backing of the Americas and the Dominions to form, “a Western democratic system”. This union would comprise Scandinavia, the Low Countries, France, Portugal, Italy and Greece. When it was possible Spain and Germany should be included.

Bevin had been a key figure in the war coalition and his recommendations drew on a view of Britain’s position in the world that dated back to Disraeli. In October of the same year, Churchill explained this view to a Conservative Party meeting in Llandudno.

As I look out upon the future of our country in the changing scene of human destiny I feel the existence of three great circles among the free nations and democracies… The first circle for us is naturally the British Commonwealth and Empire, with all that that comprises. Then there is also the English-speaking world in which we, Canada, and the other British dominions and the US play so important a part. And finally there is United Europe. These three majestic circles are co-existent and if they are linked together there is no force or combination which could overthrow them or even challenge them.

Now if you think of the three interlinked circles you will see that we are the only country which has a great part in every one of them. We stand, in fact, at the very point of junction, and here in this Island at the centre of the seaways and perhaps of the airways also, we have the opportunity of joining them all together. If we rise to the occasion in the years that are to come it may be found that once again we hold the key to opening a safe and happy future to humanity, and will gain for ourselves gratitude and fame.

Bevin used Churchills “three majestic circles” to give Britain the status of a Third Force with the “power and influence to equal that of the United States of America and the USSR”. It would combine American economic power, European civilisational values, and strong British leadership. To succeed it would have to “secure acceptance in Europe on one hand and in the Dominions and the Americas on the other”. But joining the circles, let alone locking them together, was to prove elusive.

In 1955 Britain shunned the Messina conference which led to the Treaty of Rome and the creation of the EEC in 1957. It feared that joining a European union would limit its relationships with America and the dominions. The following year Britain led an Anglo-French expedition to retake the Suez canal. The canal was an important strategic asset which had been nationalised by the Egyptian President Abdul Nasser. In a humiliating exercise of global power, the Americans forced Britain to abandon the expedition. Suez marked the end of British pretensions to imperial power. It broke apart the “three majestic circles”. Britain lost its freedom of strategic action. It lost its power in the Middle East. It lost a partnership with France in creating a Western Union in Europe. It lost the trust of the Commonwealth. And its role of co-leadership with the US was exposed as the pretence it was.

Britain, declared US foreign secretary Dean Acheson, has “lost an empire and not yet found a role”. The EEC now promised a better prospect for maintaining British great power status. Macmillan applied to join in 1961. His foreign secretary Selwyn Lloyd identified the British dilemma. “The question is how to live with the Common Market economically and turn its political effects into channels harmless to us”. In 1973 Edward Heath finally took Britain into the EEC.

Forty three years later, in June 2016, Britain voted to leave what had become the EU. Selwyn Lloyd’s question was answered. When continental European power is seen to be too intrusive in English national life, politics comes before the economy. Nation comes before class interest. England comes before Europe. The institutions of national sovereignty matter more than the risks of economic and national decline.

A national popular politics

The shires and what is now an ex-industrial working class once again formed a national popular English coalition to take Britain out of the EU. Seventy years after Suez, the reaction of the elites is the same anxiety about decline and failing economic prowess. The people of the towns and country of England have shown more faith in themselves and their history than has their governing class. For this they have been accused of ignorance, naivety and misjudgment.

Those who voted to leave the EU are a moderate majority of mainstream England. They voted uncharacteristically for a radical change. They want change for stability and security. Factories have been exported, workers have been imported, ways of life have disappeared. Nobody asked their opinion about these dramatic changes and in their eyes nobody, least of all politicians, appeared to be in control of them. Many of those who voted to Remain share the same sentiments. Their reasons for wanting to remain in the EU were often cursory rather than out of conviction.

While many in London, and the big cities and university towns are angered and disorientated by Brexit, millions in the country who voted both leave and remain are hopeful. Brexit is seen as an act of national self-affirmation. They are ready to make something of their country. They want the politicians in Westminster to give the lead and to get on with it.

The people of England are not inclined to protectionism. There is no national appetite for withdrawal from the world. Unlike continental Europe, England has no tradition of mass organised anti-Semitism, racism or fascism. Where it does exist it must be confronted and defeated. Britain’s security has historically depended upon stability in Europe. In the past, British imperial, maritime and commercial ambitions were served by our historic doctrine of a balance of power in Europe. Brexit is not withdrawal but a new chapter in a long historical association with our European neighbours.

Brexit is one more act in the breaking up of the old world order. It is the rupture with the past Labour did not want. Tom Kibasi has described it as a vote for change that makes change harder. This is its paradox and its challenge. Labour’s first task is to build bridges across its own internal divisions in the name of a national popular politics. It must secure a leadership capable of rebuilding its national coalition around the labour interest. It has to campaign for a Brexit in the interests of working people. But it cannot consume itself with a transactional process it will have only a limited ability to shape. That is for the Conservatives to entangle themselves in. Its task is to look ahead and to shape the future with the promise of a new political, social and economic settlement for England and the UK. And on the basis of this national renewal a role for Britain in the world.

A national popular politics has three objectives.

The first is to define a British sovereignity and restore control of our borders and law making. The nation state, accountable to its population, and working through treaties, partnerships and alliances, remains the best means of managing globalisation in the interests of its own citizens. Britain needs constitutional and political reform of its union and its governance. The Brexit vote was an English vote and so the renovation of self-government in England should be a priority in a more federal UK. The free movement of labour must end and immigration brought under national democratic control. It is a case made by Tom Kibasi and by Chuka Umunna.

Social renewal is part of national renewal. The social ties and ways of life that bind people together have been loosened and so they have been brought into question and become political. Rapid and historically unparalleled demographic change and an ageing population are both transforming society. Labour needs to spread political and economic power to people where they live and work in order to help strengthen our common culture and to improve social integration and inclusion.

The second objective is to develop a Labour political economy that places work at its centre. Britain needs a national economic settlement that redresses the balance of power between capital and labour in the interests of working people. Lower levels of immigration will demand better opportunities for skills training and vocational education. There is a need to find solutions to the endemic levels of low paid jobs and the growing precarious nature of employment. Automation and new technologies will transform the world of work. A universal basic income is not the answer. It is a political red herring and a big vote loser. The immediate problems to address are the chronic problems of low productivity and the financial culture of short-termism which undermines business investment in longer term economic growth.

Labour needs an industrial strategy that recognises Britains different economies, and the need to devolve political power and resources. The structures and institutions of the national economy – corporate governance, banking and investment, vocational education – need reform and development. The goal is private sector investment in decent jobs and better wages; a strong social economy of quality elder and childcare; skills, training and innovation in education; and a social security system in which the principle of contribution and the capacity to protect vulnerable individuals are both strengthened.

Brexit creates significant problems but also opportunities, for example: negotiating trade deals that incorporate the labour interest, creating a new kind of environmental politics, taking on entrenched interests, innovating new approaches to farming and food security, and enacting redistributive fiscal policies.

The third objective is to define a strategic security and foreign policy on the basis of a fair and enduring settlement at home. The boundary between foreign and domestic policy has been broken down by immigration, terrorism and the threats of cyber attacks. The soft power of cultural influence and social exchange is now as necessary to projecting national influence as the willingness to use military force. What were once echoes of distant events are now sounds and images catapulted live into daily life by the new communication technologies.

The failure of the liberal global order

The liberal global order established after the Second World War and underpinned by American power is undergoing major changes. The 9/11 terrorist attack, the disastrous invasion of Iraq, the failure in Afghanistan, the rising power of China, the financial and economic crash in 2008, the defensive aggression of Russia, the hopes of the Arab Spring and the subsequent catastrophes in Syria and Libya, the ongoing and generational threat of Islamist terrorism, are sequences of events and trends associated with the assertion and then the scaling back of American foreign policy ambitions.

The peoples and governments of non-Western countries with China in the fore are asserting their national interests against the liberal, rules-based, global order. They perceive it giving legitimacy to actions which reflect the interest of the United States and other Western powers. Over the last decade national religious and traditionalist cultures have asserted themselves against their modernising and westernising ruling elites. The trend has created a diversity of populist leaders , for example Turkey’s Recep Erdogan, India’s Narendra Modi, and Russia’s Vladimir Putin , who have reached outside their national political institutions to draw their power from “the people”. A similar surge of populism within Western market economies has produced a generation of nationalist, anti-immigration politicians such as Marine Le Pen of France’s Front National, Geert Wilders of the Dutch Party of Freedom, Nigel Farage of UKIP, Norbert Hofer of the Austrian Freedom Party, Frauke Petry of Alternative for Germany, and most recently President Trump.

The liberal global order is being challenged from without but undermined from within.

In the West the failure of liberal left and social democratic parties to recognise the political salience of culture rendered them defenceless against right wing populism. Their adherence to a Rawlsean view of social justice replaced the idea of citizenship as belonging to a community with its social obligations, with a commitment to universal abstract rights. It is a contractual politics that speaks for everyone and so nobody in particular. Its model of distributive justice ignores the specific and historical bonds of mutuality and reciprocity that define a society.

Consequently the liberal left and social democratic parties either offered only a weak defence against the whirlwind of globalisation, or they actively encouraged it in the name of progress. The industrial jobs of its traditional middle ground voters disapeared. Their wages stagnated. Living standards fell. Ways of life were destroyed or felt threatened. These men and women wanted to recover the belonging of a membership to a community. They sought the political representation of their national and cultural particularity as a confirmation of their esteem and sense of belonging. Liberal left and social democratic parties offered neither. They failed to use democratic politics to grapple with the conundrum of class and identity. Instead these voters were accused of nostalgia and xenophobia and abandoned to the populist right. As the left loses its support amongst working people it has drifted into becoming the voice of the better off and university educated on behalf of the poor and oppressed.

The dominant liberal order with its rules based institutions and technocratic elites has operated in a similar way. It has negated the particularities of civilisational cultures and modernities in the standardizing of market liberalism and in the name of the universal values of justice. And it has done so whilst protecting Western interests and promoting Western political and economic values.

Globalisation always comes to earth and where it does it has triggered populist movements seeking the cultural authenticity of the traditional, the religious, and the local to recover esteem, secure a sense of political agency and to make a complex world intelligible. It is these forces as much as the geo political weight of China that are reshaping the future global order.

Britain in the world

For Theresa May the answer to this instability is to renew the “special relationship” with the US: “our two countries together – have a responsibility to lead”. Britain will be one of the most forceful advocates for business, free markets and free trade anywhere around the globe. But the solution to populism and the fragmentation of the world order cannot be simply reasserting the principles of liberal market capitalism. They have been a primary cause of the cultural insurgencies.

Winston Churchill fought the war in Europe on the freedoms of speech, of religion, and of freedom from fear and want. In his second 1948 Cabinet memo, Future Foreign Publicity Policy, Bevin defined Britain’s moral leadership in the Cold War along similar lines. His aim was to use arguments most likely to appeal to the “broad masses of workers and peasants”. Both believed in the three majestic circles as the basis for Britain to project its democratic values and to leverage its place in the world.

Britain’s circles of influence can seem a conceit disguising its declining power. But they provide a useful analogy for defining Britain’s history of international relations and its unique geopolitical position.

Whatever the outcome of the Brexit negotiations Britain’s primary relationship will be with Europe and so with a changed model of the EU. It will likely be a more politically integrated core with a diffusion of peripheral states. It is in Britain’s interest to support a coherent, stable and prosperous Europe. As the initiating force behind EU expansion it has a responsibility to the outer ring of EU states. It has a major role to play in Nato and will maintain a readiness to use military force along with France and the US. And it will continue to play an influential role in bodies such as the G7, the European security council, and the Basel committee on banking regulation.

The “special relationship” with the US is a sentimental one. In reality it is transactional and rarely reciprocal. So be it. Britain must use the genuine affection of the American people and find its points of leverage and use them profitably.

The third circle was once empire, then it became the commonwealth, and now Britain must reinvent this sphere of influence as a democratic moral leader, social connector, trader, ideas maker, and culture creator, in order to build relationships with other creative powers who know how to project themselves onto the world stage. It is in this sphere that Britain can play a role contributing to rethinking the global order.

British domestic politics will become more global. Future Labour leaders will need to be well versed in foreign relations. Our geo-political position requires security in Europe, a bond of friendship with the US, and a global agility building alliances with emerging blocs of nations. These require a strong, ready military capability and a continuing global pre-eminence in soft power. Above all it means a successful economy that can sustain a fair and durable social and political settlement at home.

In 1979 Margaret Thatcher’s national popular politics produced a new liberal market economic and social settlement that transformed the country. In 1997 Tony Blair created a progressive politics in reaction to the subsequent years of Tory sleaze and neglect of public institutions and services. He made the country a much better place to live in. However, despite some extraordinary achievements he did not transform the liberal market settlement of Thatcherism.

The conditions now exist for a national popular politics that can make that transformation possible. Viewed from Labour’s present dire situation it looks an impossible task. But Labour’s brand in the country endures and this is a strategic direction Labour can take to break out of its inertia and self-absorption. The future is uncharted and so it is there for the making. History provides us with maps that can guide us. This is a defining moment for our country and who dares will shape its future.

Jonathan Rutherford is an academic and was a member of the independent inquiry into why Labour lost. He also worked on the party’s policy review 2012-14.