The report Future Proof, from the Institute for Public Policy Research (IPPR), offers a bleak picture of Britain in 2030. An ageing population will place a huge burden on the public coffers. Automation and other technological change will destroy millions of jobs. And our careless relationship with the planet we inhabit will become a drag on growth and prosperity.

Meanwhile, the disaffection expressed in the EU referendum has made it impossible to ignore the scourges of low pay, insecure jobs and massive regional inequality. If there remained any doubts that our economic woes do not begin or end with the deficit, this report neatly dispels them.

Of course, all these problems will be made a lot harder by the uncertainties and upheavals created by Brexit. At a time when we need to be moving forward, the knock-on effects of leaving the EU will make it difficult even to stand still. But, while daunting, all these challenges can either be overcome or turned to our country’s advantage, if action is taken now.

Tackling climate change can make us world leaders in burgeoning markets for green technology. Like technological revolutions before it, automation promises to make arduous and repetitive labour a thing of the past. And research by the women’s budget group has shown that spending on care is a boon to the whole economy, particularly women.

But if we are to make hope possible rather than despair convincing, we need to fundamentally rethink the way we engage with our economy. The problems outlined by the IPPR appear insurmountable only because we’ve lost faith in our collective ability to mobilise our talents and resources to shape the future we want. The heady days of free market capitalism made “interventionism” and even “state-partnership” dirty words. Anything that wasn’t a deregulated, market solution was deemed a failure. So out went the baby with the bathwater.

Clearly all economic epochs have their failings. The postwar era of mixed markets, state aid to industry, and nationalisation was no exception. Nonetheless, in the UK it generated better overall growth that was more evenly distributed than anything achieved since 1979.

Perhaps the greatest trick of free market fundamentalism was to have us believe all forms of state intervention and partnership were doomed to repeat the failures of the past. This is at best a distortion of the truth and at worst a naked lie. Domestically, you only have to look at our current economic and political predicament to understand that. Internationally, it’s confirmed – from Germany to South Korea – that an active state is not counter, but essential, to succeeding in a modern, dynamic economy.

The recent resurgence of interest in industrial strategy is a sign that people are beginning to recognise this. Alas, government announcements have so far fallen short. Boosting infrastructure and innovation, welcome as they are, will not deliver the kind of restructuring our dysfunctional economy needs, or equip us for the challenges ahead. We need to “reset the dial” on our economy, not go in for piecemeal tinkering around the edges.

The genius of the market is supposed to lie in its ability to allocate society’s resources to their most efficient uses without central direction. Labour has long recognised that efficiency doesn’t always correspond with what is socially optimal or, in other words, “fair”. We’re now facing up to the fact that the market is not always the best guarantor of efficiency either.

There is nothing efficient about firms spurning more productive technologies because years of unrelenting attacks on social safety nets and collective bargaining have created cheap labour in abundance. Or about letting the talents and resources of large swaths of the country go to waste because the south-east of England offers a better rate of return. There is nothing efficient about destroying the planet as we know it because vested interests want to keep us addicted to fossil fuels.

An industrial strategy is important because it allows us to democratically decide the kinds of economy and society we want, and the goals we wish collectively to achieve. The question is whether the Tories are ready to do this. At some point the secretary of state for business, Greg Clark, is going to have to make a choice: is his industrial strategy going to be led by market forces, or is it going to take new directions and lead our economy into the 21st century?

The former may increase innovation at the margin and provide a little more money for skills and local infrastructure. Only the latter can ensure that every part of our country has a vibrant local economy, that every person displaced by technological change and decarbonisation finds new, decent employment, and decisively end our destructive dependence on carbon.

Clark has said he wants to be interventionist. What is less clear is whether the rest of his party will let him. Mayists are scarce in the Conservative party, and Clark lacks the ideological base to achieve his ambition. So expect more radical rhetoric backed up by token gestures.

Meanwhile, the Labour party is ready to cut through the doom and gloom, not just identifying what is wrong with our economy and society but articulating an alternative vision and setting out a route map for getting there.

• Labour’s industrial strategy consultation is open until 16 February