“John Smith do you know what Socialism is?… Good or bad, wise or foolish, it is all I have to offer as a remedy.”

From Merrie England, by Nunquam, 1893

“I want to replace the Labour party and make Ukip the patriotic voice of working people.”

Paul Nuttall, leader of Ukip, November 2016

When Merrie England (quoted above) was published in 1893, it became a literary sensation almost overnight. Written in vivid, plain English by the Manchester-based socialist campaigner and journalist Robert Blatchford, the book was presented as “a series of letters on the Labour problem, addressed to John Smith, of Oldham, a hard-headed workman, fond of facts”.

To this fictional resident of one of Lancashire’s grimmest mill towns, Merrie England advocated a socialist transformation of the most advanced capitalist economy in the world. Using his Latin pen-name, Nunquam, Blatchford deployed satire and polemic to call for communal collaboration to replace competition and chasing profit as the driving force in human lives.

“Take the case of a tram guard working, say, 16 hours a day for £1 a week,” begins one of Nunquam’s rhetorical salvos. “That man is being robbed of all the pleasure of his life. Now there ought to be two guards working eight hours at £2 a week. If the tram company makes big dividends the cost should come out of those dividends.”

This pocket-sized vision of new Jerusalem, to be built in the hard-bitten towns of the industrial north, was an instant popular classic. When Merrie England’s initial print run of 30,000 sold out, a new penny edition was published and was instantly snapped up by mill workers, railwaymen, maids and hotel porters. The Manchester Guardian suggested that for every British convert won over to the socialist cause by Karl Marx’s Das Kapital, 100 were persuaded by the arguments of Nunquam. Blatchford’s coruscating critique of free market economics and the culture of individualism became part of the warp and weft of the nascent Labour party.

Those were heady times for a British working class growing in confidence and taking its first political steps. Over a century later, the modern Labour party could use a Merrie England.

Labour’s identity crisis

The working class, wooed so successfully, is in danger of going missing. Last June’s referendum laid bare multiple divisions in British society, but none so full of pathos as that emerging between Labour and its own traditional supporters in the heartland towns of the Midlands and the north.

It has been estimated that 149 of Labour’s 232 constituencies voted Leave, in defiance of the party’s wishes and at odds with the overwhelming majority of Labour’s mainly professional membership. Alarm bells are ringing loudly, and this month’s unexpected byelection in Stoke Central already feels seminal.

Last week, Ukip candidate and leader Paul Nuttall, accompanied by his predecessor Nigel Farage, visited the city, which voted 70% for Brexit. At the Victoria Hall – built in 1888 to commemorate Queen Victoria’s golden jubilee – he claimed to be “facing down a Labour party that has more in common with Stoke Newington than Stoke-on-Trent”.

Farage was cheered when he said this month’s campaign would expose the fact that “Labour was not the party it was for the past 100 years”. Brexit, and the stark class divide between Remainers and Leavers, has suddenly placed Labour on the wrong side of the working-class history it did so much to forge.

On immigration, the liberal policies of Labour are poles apart from the consensus in longstanding strongholds. As it tries to navigate new times, the party risks plunging into the abyss of what one media wag described as a 0% strategy: not Brexit-friendly enough for those who voted Leave; not Europhile enough for the Remainers defecting to the Lib Dems in droves.

Jeremy Corbyn and Labour’s Stoke Central candidate, Gareth Snell, meet local councillor Candy Chetwynd and her 17-week-old daughter, Aurelia, while canvassing. Photograph: Joe Giddens/PA

Commentators of various stripes have urged Jeremy Corbyn to change the subject and talk about something else, the NHS for example. But as endless arguments between Corbyn and his MPs over Brexit underline, the identity crisis is too serious to ignore.

In Scotland, when Labour found itself on the “wrong” side of a referendum divide, it proved to be a tipping point. A subsequent mass desertion to the SNP all but wiped out Scottish Labour, leaving it with a single seat in 2015. In the north of England and the Midlands, where Labour strongholds have become bastions of Brexit, local MPs can feel the chill in the air.

A 1977 print of Merrie England by Nunquam (Robert Blatchford). Photograph: abe books

“It’s about survival,” says Lisa Nandy, who represents Wigan. “The disconnect between towns and the left is enormous. There is a growing feeling that no one is speaking for them. I feel we could be one or two general elections away from Scotland happening in the north of England. Most of our members are concentrated in London and the other big cities. But without support from the towns we won’t survive.”

Win or lose in Stoke (and polls suggest a nail-biter), Labour faces the question of what and who it is for in the Brexit towns of Britain. Early socialists were exuberantly confident that they would transform factory town lives for the better. But that was at a time when the nation was in its imperial, industrial pomp, glorying in the status of “workshop of the world”. For huge swathes of the country, the reversal of fortunes is depressingly stark.

The factories have gone, replaced by insecure, badly paid and often temporary forms of work with poor conditions. The trade unions have diminished in size and influence.

Over the past 30 years, the renaissance of economic liberalism has steadily liberated capital from its ties and obligations to nation, region and locality. Across Europe, in the words of the political economist and former adviser to the German Social Democrats Wolfgang Streeck, financial capitalism has “overrun its opponents”, from unions to national governments. The 21st century version of Labour is seen by many disillusioned supporters as having done far too little to reverse that trend.

Support for the freedom of movement of people within the EU – so toxic that canvassers were urged not to speak of immigration in the election of 2015 – is seen as further evidence of a disregard for the texture and realities of life in communities.

How to find a way back? Merrie England sold a romantic vision of a better life as well as a new economics to its 2 million readers. To see off the ugly, modish politics of scapegoating and xenophobia, embodied in the Little England rhetoric of Farage and Ukip financier Arron Banks, the modern Labour party needs to find something similar for the here and now.

A place to start might be by exploring what makes communities flourish, and what corrodes their dignity.

The melancholy towns

During the referendum campaign, Nandy experienced a kind of Brexit epiphany when she was asked to speak to Nissan factory workers in Sunderland, the north-east city that is Britain’s biggest exporter. The Japanese car manufacturer employs 6,700 people at its Wearside plant and local managers had warned the workforce that a vote to leave the EU could jeopardise their jobs. But the message wasn’t getting through. “Nissan’s management told us, ‘They won’t listen to us, maybe they’ll listen to you’,” says Nandy. “Me and a guy from the GMB went over. But it was us who ended up listening to them. They told us, ‘We know that this might cost us in the area – and we’re going to do it anyway.’ I drove home thinking, ‘Oh my God! What’s going on here?’”

In the shocked aftermath of 23 June, views such as those expressed by the Nissan workers have frequently been characterised as “irrational”. The former Conservative chancellor George Osborne is writing a book about the populist surge that led to the collapse of the government in which he served. It is to be titled The Age of Unreason. Labour, not least because these are its own voters talking about their lives, cannot afford to be so dismissive about a call for a politics that deals in more than the economic bottom line.

A Nissan worker at the company’s Sunderland plant. Photograph: Oli Scarff/AFP/Getty Images

For Nandy, whose constituency voted 64-36% to leave the EU, similar themes have emerged closer to home. After a year defined by toxic disputes about how to regulate borders, the former mining town she represents is currently embroiled in one of its own. For generations, a stretch of land known as the Bell has served as a green lung and a buffer dividing the working-class suburb of Kitt Green, a former pit village, from nearby Orrell. Lying a few minutes’ walk from the giant Heinz factory that is still Wigan’s biggest employer, the Bell does not offer a particularly spectacular view. But it serves as a place for Sunday walks and fresh air, and offers the quirky attraction of being the winter home to some of the donkeys employed on Blackpool beach each summer.

At least it does for now. The Labour-controlled Greater Manchester Combined Authority – which includes Wigan - has announced proposals to build 170 houses and 150,000m sq of warehouses on the Bell, practically wiping out this last remaining stretch of green belt. There will be jobs, albeit of a low-grade kind, created by the development, but when Nandy held a public meeting at the St Francis of Assisi Church in Kitt Green, she was overwhelmed by the response. “On a cold Thursday night, over 350 people came,” said Nandy. “There were so many people that some had to queue for 45 minutes to get in. There was anger, frustration but also a hell of a lot of passion. That green belt protects the village’s identity; it stops Kitt Green morphing into urban sprawl. And somehow it was about more than the green belt. It was about things like local pride and self-esteem.”

The furore was so great that the GMCA extended its period of consultation into this year. But what really irks Nandy about the affair is the top-down high-handed way the proposals were released via an arcane and technical document called the Greater Manchester Spatial Framework. In parliament she railed at the presentation of plans that would change the identity of Kitt Green.

“Most of my constituents had never heard anything about the plan before I wrote to tell them about it,” Nandy told MPs. “Even the name is deliberately off-putting to people. It is incredibly difficult for the public to get into these documents, understand what is proposed and make their voices heard.”

That’s where the Brexit vote came from. People feel they are defending something that is in danger of being swept away. Lisa Nandy, Labour MP (Wigan)

A tin ear for local sensibilities and a high-handed manner can be dangerous as well as demoralising. A couple of years ago, in another area of Wigan, the giant contractor Serco decided to house about 100 asylum seekers in a local Britannia hotel. A private company, interested primarily in a financial return, was entrusted by government with the fates of highly vulnerable people and the sociology of a town.

“The decision was not negotiated with local people” recalls Nandy. “No one ever sat down and said: ‘We’ve got this crisis that we need to try and resolve.’ Suddenly, in a small, overwhelmingly white community, 100 mainly young African men were ‘parked’ overnight with very little support and no notice to the people who lived there.”

It was a gift to the racists. False rumours spread that schoolchildren had been filmed by migrants and a church had been broken into. Far-right activists began to take an unwelcome interest and a petition was launched calling for the migrants’ removal. It was swiftly countered by a bigger one welcoming them to the area, but the episode was tense and unpleasant. “Just handled so badly,” says Nandy. “Wigan people don’t lack compassion. When there was an appeal for Syrian refugees, 36,000 bags of donations were raised in two weeks. But when there’s no debate, there is a feeling this thing has been imposed on you. People didn’t blame the migrants in the hotel and many did their best to help. But there was real anger.”

Nandy is at pains to point out that Wigan is not some kind of post-industrial disaster-zone, plunged in gloom and misery. But people do feel the loss of the old pit town identity, a sense of powerlessness over the present and a feeling that things could and should be done better. “Wigan is not a shit place!” she says. “Most have enough to get by, but it feels as if everything is under strain, that things that really matter are under threat. That’s where the Brexit vote came from. People feel that they are defending something that hasn’t quite gone yet, that is in danger of being swept away.”

She mentions the elderly woman who had a weekly toenail painting service provided by council social care. “It was stopped, and the sense of loss she felt went way beyond anything to do with her toenails. It was about social contact and inclusion.”

According to Marc Stears, former chief speechwriter to former Labour leader Ed Miliband, stories such as those from Wigan indicate the extent to which an idea of local “sovereignty”, beyond issues of migration, was at stake in the referendum. Addressing that, he believes, is fundamental if the left is to recover its relevance in the Leave towns of England.

In October, Stears relaunched the non-partisan New Economics Foundation (NEF), which defines its mission as: “Building an economy where people really take control” – a nod to the now notorious “Take back control” slogan used by the Vote Leave campaign. “In the late 90s and early 2000s,” says Stears, “New Labour explicitly did a deal with the devil – it said, ‘Look, we’ll leave neoliberal policies alone because we’ll be able to cream off enough money to redistribute adequately.’ So you could generate support for the public services by being very hands-off with market forces, but then redistributing through the state.” The achievements of New Labour in re-investing in the NHS and renovating crumbling schools were the fruit of this bargain. But, says Stears, there was a darker side to the project.

“The big problem with the model was that the Labour hierarchy grew to have disdain in high places for the people who were not happy with that settlement. People who were miserable at work because they were being treated badly by some corporate power; or people working in a public sector that was increasingly marketised and target-driven; or people whose communities were changing and felt aggrieved at the emergence of clone towns and high streets that lost all their identity.”

The crash brought an uneasy compromise to an end. “If economic times are good and you are getting a fancy new GP surgery, you may feel you can put up with the lack of control at work, or the nature of the high street and so on. But when that improvement in the public realm comes to a shuddering halt, as it did in 2008, then this deal is no deal at all. And you get the populist revolt that we’ve seen.”

For Ukip, Donald Trump and other rightwing populist forces on the rise, the aftermath to the crash offered a golden opportunity to fuse xenophobic nationalism with provincial and regional discontents that have been simmering for years. But the response, says Stears, cannot be to wave the anger away as part of an “age of unreason”. Seeing off the likes of Farage depends on finding a vision of work, place and community that can speak to the wider concerns of those Nissan workers in Sunderland, not a return to the status quo ante.

“Can it be re-imagined?” asks Stears. “What does it take to re-entangle an economy in its local context, to put people in control of economy, rather than the economy being in control of them?” It is a question that the readers of Merrie England would recognise.

Professor Karel Williams, who teaches at Manchester University’s business school, has spent the last couple of years trying to work out an answer. Williams argues that a successful approach will start from where communities are actually at, in what he calls a new politics of “the mundane”.

What Williams calls the “foundational economy” – provision of essential goods like health, education, social care, utilities, refuse collection, transport, prisons and food distribution – constitutes by far the biggest source of employment in many towns.

Care workers, refuse collectors, bus drivers and cleaners are doing the humble, under-appreciated jobs that are fundamental to collective wellbeing. But the cult of outsourcing and the privatisation of the public sphere has meant that the delivery of these public goods has largely become a profit-driven, high-stress, low-pay endeavour.

It is by beginning here, argues Williams, that a project to improve the inner lives of towns can begin. In a study of the large number of care homes run by private equity-funded providers, Williams and fellow researchers from Manchester’s Centre for Research on Socio-Cultural Change found that an average 12% financial return was required to reward investors and service debts. Local authorities could borrow capital at a far lower rate, potentially enabling more care home places and fairer wages for underpaid carers. Public financing, by releasing operators from the pressures of shareholder return and high interest rates, would also allow more scope for local experiment and innovation.

As this and other areas of the “foundational economy” were wholly or partially brought back into the public sphere, the “common good” could replace profit extraction as the guiding policy framework.

“Unstable, financialised ownership of what should be low-risk, low-return activities is a mistake,” says Williams, “We need to think again about socially created value in areas where there’s no risk that demand will go away, like utilities, care services, bus services, food distribution.”

NEF ideas on community land trusts, land taxes and local and regional banking speak to the same theme of reining capital back in, and re-claiming swathes of communal life that have been subjected to unrestrained market incursion for three decades. “Some things should be owned and run for the benefit of all of us,” says Stears. “Especially when they are essential for meeting basic human needs.”

There are the seeds here of a new philosophy of public wellbeing that seems like natural Labour territory, offering a vision of municipal progress, civic pride and a rehabilitation of local democratic control.

Given the coming mayoral elections in which, for example, Andy Burnham is likely to become the first mayor of Greater Manchester, there are likely to be opportunities for Labour to explore this “civic” route to renewal. The alternative – already unfolding in Stoke – is that, as Stears puts it: “The nationalist nativist right will say, ‘We’ll stand up for place and country and belonging and an economy that works for this community.’”

Farewell to the working class?

The stained glass windows of Rochdale’s splendid Victorian town hall, built 20 years or so before Blatchford wrote Merrie England, bear colourful witness to the town’s golden age. One by one, they pay tribute to the town’s onetime trading partners in Prussia, Spain, Austria, Denmark and Sweden. The tools of Rochdale’s cotton-spinning vocation are also lovingly depicted – a source of pride, wealth and a sense of purpose.

Rochdale mill workers in 1911. Photograph: Alamy Stock Photo

This was where Gordon Brown’s general election campaign went off the rails in 2010. Brown, then prime minister, was recorded describing Labour-supporting local resident, Gillian Duffy, as a “bigot”, after she complained about the scale of immigration into the area from eastern Europe. It was the moment that party’s dangerous disconnect with its northern heartlands became visible for all to see.

Rochdale voted 60% to Leave, and the pleas of local Labour MP, Simon Danczuk were ignored. In the backroom of the Roebuck pub, a couple of minutes’ walk away from the town hall, some of the white working-class huddle of drinkers are happy to acknowledge that racism was a factor.

“I’m racist, I don’t mind saying that,” says Linda, who works as a cleaner. “The Muslims, it’s a problem. That wall that Donald Trump is building – the Chinese built one centuries ago to keep people out and it worked. We need one over here. We could do with a Trump over here.”

The level of anger is striking. Zoe, 55, is a carer and works with disabled people. She is furious about what has become of Rochdale’s market, which a year ago left its longstanding home in the town’s exchange building and is now opposite the metro stop. “It’s full of tat and loads of rabbit-hutch stalls run by Muslims with their stuff.”

Others voice the common complaint that asylum seekers and refugees are overwhelmingly housed in the poorer parts of the country, rather than in the wealthy south-east.

Scott, who celebrates his birthday the following day, and is the worse for wear, laments the number of people from ethnic minorities on the estate where he lives. “Farage and Trump in front of that gold door,” he says. “I fucking loved that. I’ll tell you this. If Labour doesn’t get right behind Brexit – right behind it – Labour’s finished in places like this.”

The xenophobia (by no means shared by all) feels suddenly licensed, an ugly sign of the new times. But the root cause of its virulence seems to be a sense of abject social decline. Mark Clegg, who clearly doesn’t share some of the views of his neighbours, is a former butcher and a Labour voter. Around the tables there is general agreement when he says flatly: “Rochdale has become a nonentity. Rochdale and Oldham [five miles away] have been sinking together for decades.”

“Twenty-five years ago this town was buzzing,” agrees Zoe, sadly. “More like 40,” chips in someone, but she ignores the correction and carries on. “Drake Street was fantastic, full of life. Now it’s just pound shops and pawn shops and charity shops. Do you remember how the market used to be world-renowned? What’s been lost round here… it’s a scandal.”

A former publican speaks up: “We haven’t even got a fish and chip shop in the centre any more. It closed when the business rates went up. Rochdale’s business rates are totally unrealistic, that’s why we’ve got these charity shops. They don’t have to pay them!”

Clegg points to the fact that “McDonald’s have shut down in the main street. Once that happens, you’re stuffed. I know you get rose-tinted glasses and all that, but it really was different and better before.”

Local politicians have tried to lift the mood. Part lottery-funded, a 14th century medieval bridge was re-opened last year after more than a century out of use. The River Roch now runs through the town again, having been concreted over. “Build and they will come,” jokes Clegg. But no one in the Roebuck believes anybody will come. Linda says she will “100%” vote for Ukip if they put up a candidate here in 2020. The Labour party is lumped together with all the other institutions that have let Rochdale down.

Among some on the left, there is a conviction that, whatever its problems in the towns, Labour’s future lies in the cities where the youthful radicalism that launched Occupy a few years ago, and played a vital role in the rise of Podemos in Spain, can be developed. The socially conservative traditional working class, its habits and prejudices forged in the industrial era, is a fading irrelevance.

Jon Cruddas, the Labour MP for Dagenham, once home to 40,000 Ford employees, and the former head of the party’s policy review, is distinctly unimpressed by that analysis.

“For some of the fashionable left, their strategy seems to be to get out from under the present crisis by disinventing the working class altogether,” says Cruddas. “They assume they will disappear, replaced by some combination of automation and artificial intelligence, and are focusing all their energy on an urban networked youth as the new base for the left. You have a problem with the working class so you just assume it will go away – not exactly the most creative, thoughtful route through our current problems!”

Taking a different path, Cruddas is, in a certain sense, going back to the future. He recently set up a new grouping of academics, writers and politicians, including Nandy, with the task of “renewing the public philosophy of the left”. The aim is to produce a book by the summer and a sea change in Labour’s orientation.

One of the points of departure, says Cruddas, is the suggestion by Michael Sandel in a recent interview with the New Statesman that Labour needs to return to “its roots in a kind of moral and civic critique of the excesses of capitalism”.

This was the core thrust of Merrie England, and the original spirit of a Labour party that had its roots in religion, not Marxism. But during the 20th century, the “ethical tradition” faded as the parliamentary party became more pragmatic and managerial, while the left pursued the more confrontational Marxist route of class struggle. And from the late 1980s onwards, as the new individualism launched by the Thatcher/Reagan era swept all before it, Labour began to talk far more about aspiration, choice and social mobility than it did about community.

To argue that, as the Christian socialist RH Tawney put it, the left stands for “the familiar commonplace that ‘morality is at the heart of things’ and men are all, in truth, members of one another,” became rather unfashionable. For the pragmatists of New Labour, what was good was what “worked”. But, as the high tide of economic liberalism recedes, maybe Labour’s neglected ethical tradition is finally due a revival. These Trumpian times could certainly do with a warmer, more inclusive politics of community where local cohesion doesn’t come at the expense of the outsider.

The growing melancholy of England’s towns led to the angry surge towards the Brexit door. For Labour, the result was a body blow to the party’s sense of itself and marked the beginning of a mighty battle to hold on to its bastions, beginning with Cumbria and Stoke. A Tawney-style Labour party may have a chance of winning that fight, and regaining the affections of the descendants of “John Smith of Oldham”. But it will be a long struggle.

“Once you used to think of Labour as the party for the working man and woman,” says Clegg, as the night in the Roebuck drew to a close. “Not any more.”