There is no deeper indication of a political party in grip of breakdown than the suggestion it might turn to Jacob Rees-Mogg as its saviour.

For any readers still blissfully unaware, Rees-Mogg is the pin-striped, Trump-backing opponent of gay marriage and abortion who notoriously took his former nanny on the campaign trail. (His eldest son, at nine, accompanies him more regularly, in a matching double-breasted suit. He drives a Mercedes to canvass – “a Bentley would be most unsuitable for canvassing.”) One of the few benefits of last year’s fratricidal Brexit campaign is that the wheels came off Boris Johnson. The Tory faithful seemed – fleetingly – to grasp that a knack for cracking wise on Have I Got News For You and ability to leverage Etonian privilege into lovable self-parody does not a statesman make. Yet now they’re mulling Johnson II: The Nanny Returns.

The Rees-Mogg campaign has been in the works for a while, with its strategically planned Facebook groups and chirpy Instagram posts. But why are many Tories taking (another) political joke so seriously?

Part of the answer, as the former Tory MP Matthew Parris pointed out in his critique of Rees-Mogg on Saturday, is that the man’s brain is not to be taken lightly. Rees-Mogg may play at self-caricature, but he’s sharp with it – quick with a rebuttal, admirably (to many Tories) unapologetic about his family’s pursuit of the best life for themselves and their children.

Which brings us to the real core of Rees-Mogg’s popularity in his own party. Read his recent interviews, and you’ll find precious little about social conservatism. There’s a lot on the benefits of Brexit and a sustained attack on “the governing elite in both the US and the UK”. (Rees-Mogg, son of former editor of the Times Lord William Rees-Mogg, is our new hotline to the feelings of the disenfranchised.) In a careful series of noises on economic policy, Rees-Mogg has positioned himself as the last voice in the Conservative party prepared to back untrammelled free-marketism.

No wonder backbench Tories love him. From the first moments of Theresa May’s premiership, her regime took to lifting policies straight out of the Ed Miliband manifesto. Worker representatives on boards; punitive taxes on capital and home ownership; tighter regulation for industry. Many readers of this paper may back those policies, but rightly or wrongly they have never been Tory ones. One of May’s greatest failures was to assume the public would accept her as a good faith break with the Cameron years, and judge her on her own promises rather than her party’s past. But a Tory cabinet in which she served as home secretary had dismissed Miliband’s proposed freeze on gas prices as dangerous socialism. Parachuting a few Joseph Chamberlain fans into No 10 did not mean she could face the general voter in the same rosette and rebrand those “socialist” policies as true blue.

Since her team’s disastrous showing in the election, even those responsible for its failures have taken to the media to insist that what the Tories needed was more, not less, Milibandism-lite. Writing in the Telegraph, former co-chief of staff Nick Timothy attacked “free-market fundamentalism”. In the Observer, Will Tanner warned the Tories correctly that the public has absolutely lost faith in market principles. But one good Tory answer to that is to stand firm and make the case again for free-market prosperity from scratch.

Within the Tory party there is a large block of people who resent the leadership’s abandonment of Adam Smith’s legacy

Take the stagnant housing market, the single greatest force for economic inequality in our country. The best way to reduce house prices – to allow young people to dream the now-impossible dream of home-ownership – is to build more affordable homes. But deregulation of the planning rules – despite the screams of conservationist Tory nimbys in the shires – should be presented as the best kind of free-market proposal. Similarly, there is a strong, equality-based argument for abolishing stamp duty. The elderly are our largest home-owning demographic: why shouldn’t they be encouraged to downsize and to add more stock to the supply-starved market? Who made the most public case this week for scrapping this tax? One Jacob Rees-Mogg, in Monday’s Telegraph.

Within the Tory party, both parliamentary and membership, there is a large block of people who actively resent the leadership’s abandonment of Adam Smith’s legacy. The great danger now is that those voices see a Victorian caricature as their best hope of securing the economic values of their party.

There is, and has always been, another way for fiscal conservatives to move forward. Seize the challenge of unpopularity and accept that free-market evangelism means rearticulating our tribe’s most basic assumptions. (And get serious about reforming crony utility companies while we’re at it – the subject of every ineffective Tory dinner-party chat and too few real policy changes for the last five years.)

Tory modernisers need not be Tory leftwingers. But left or right on the economy, what they must do is embrace the cosmopolitan Britain that the Cameron years championed. Abortion rights, LGBT equality, demographic diversity at the seats of power – these allow us to give people the choice over their personal lives that we claim to offer them in the marketplace. Here are the principles of social freedom that the Rees-Moggs of the world would love to roll back. We cannot allow his social conservatism to become the only Tory package deal that also offers basic Tory economics. The thinktank Bright Blue makes a similar point today – in a new publication on capitalism, Francis Maude points out that “a Conservative party that doesn’t appear to be passionately in favour of free enterprise and wealth creation lacks credibility and authenticity”. (Full disclosure: I remain an associate fellow of Bright Blue.) If Tory modernisers allow Jacob Rees-Mogg to become the party standard bearer for free-market principles, they will have only themselves to blame when the whole thing comes crashing down around them.

• Kate Maltby is a freelance writer on theatre, politics and culture