Here’s a dilemma for you. The economic order you exist to defend is crumbling: as it becomes increasingly unable to provide security and improving living standards for millions of people, it is haemorrhaging public acquiescence. Do you double down in its defence, hoping that a more eloquent and passionate defence of its supposed successes will turn the tide in public opinion? Or do you begin to concede that is indeed manifestly failing and therefore risk legitimising the arguments of your opposition?

They’re caught in a trap, as one renowned American singer might have put it. It is this central dilemma that explains the Tories’ agonising over the public sector pay cap. This freeze is in effect a pay cut when inflation is taken into account, suppressing the living standards of nurses, firefighters, teachers, police officers and other crucial public servants. This is an unavoidable sacrifice in the name of fiscal discipline, the Tories have long cried, even as the wealth of the top 1,000 Britons doubled during an epic economic crisis. It illustrated the profound injustice of our time: of the Tories’ clients in the financial sector plunging Britain into crisis, and then working people being forced to pay for it.

For the less delusional rightwingers, there is an acceptance that this punitive attack on some of the pillars of British society played a role in the Tories’ losing their parliamentary majority. Candidates vying for the leadership – such as the international embarrassment that is Boris Johnson – have publicly flirted with abandoning the freeze, while Philip Hammond has resisted such pressure, reportedly slamming public sector workers as “overpaid”. But it now looks increasingly clear that the Tories are looking to – at least in part – abandon the freeze. But will it save them?

If the freeze ends, it will be down to Labour depriving the Tories of their majority. If the Tories had condemned Labour to oblivion, as they had rather hoped, they would now be maintaining the freeze, reintroducing fox hunting, instituting a dementia tax, and confiscating free school lunches. It will be a welcome move if they do U-turn, providing respite for millions of people and possibly stemming a disastrous fleeing of talent from critical services: but it will be down to Labour having a rattled Conservative party on the run. And such a concession will embolden the Tories’ opponents: if we can win on this, then why can’t we defeat them on their other retrograde policies, too?

Such a concession will also be an admission of ideological failure. The Tories repeatedly lied about Britain being in an economic mess because of supposed Labour overspending, even though George Osborne backed every penny of Labour investment before 2008. Since then, they have tried to crucify Labour as a spendthrift party. They have defended the freeze as a critical component of their austerity programme. If they now acknowledge the necessity of increased public spending, they deprive themselves of political ammunition and legitimise Labour’s overall political prospectus. And why not then just vote for the real thing?

The painful truth for the Tories is that, just as the postwar social democratic consensus began to disintegrate in the 1970s, the neoliberal order is now crumbling. Back in the 1970s, a Labour government that lost its parliamentary majority began conceding the argument to its Tory opponents by slashing public spending. So-called neoliberalism was born under Labour’s Jim Callaghan: but it did not save the party from being replaced by the Thatcherite juggernaut. The same applies today for the Tories. According to YouGov, 43% believe a genuinely socialist government would make Britain a better place to live; 36% take the contrary view.

The polling shows that – from public ownership to hiking taxes on the rich – public opinion is firmly on Labour’s side. The Tories offer no convincing answers to the great injustices of our time, from housing to job insecurity to stagnating living standards. Instead, they are genuinely contemplating making Jacob Rees-Mogg – a charming man who happens to be the 19th century made human form – Conservative party leader. The Tories may hope that they are about to regain the initiative – but the winds of history are shifting, and they are left desperately flapping in the breeze.

• Owen Jones is a Guardian columnist