On the eve of the Labour Party conference, Jonathan Rutherford looks at how the demoralised Left can rise above the disillusionment engendered by new Labour

How are we to live? The Left once cultivated such questions, but we are bereft of a vision of a better life. Now, in the final moments of Tony Blair's premiership, with a Labour Party hollowed out by the new Labour project and the broader Left fragmented and demoralised, we need more than the old moral values and philosophical ideas dusted down for modern consumption. To breathe life back into the Left we need a practical utopian vision that will transform them into a compelling and vital story of our times.

Shortly after the 2005 general election, the pressure group Compass assembled more than 100 academics and policymakers as part of its programme for renewal. It drew on think-tanks, its own membership and networks of scholars including many associated with the journals Renewal and Soundings . It has been one of the most systematic and rigorous attempts in recent decades to rethink and renew a democratic Left politics of freedom, equality and solidarity. In the process, it has helped facilitate a new cultural space for innovative thinking, which raises some serious questions about the state of universities and their research cultures. We live in a society of unparalleled social stability and affluence. In the past three decades, the size of our economy has almost doubled. In the past 50 years, national income has tripled. But material prosperity has not brought with it increased satisfaction with life. The relationship between economic growth and wellbeing has broken down in the rich countries of the world. The measures of subjective wellbeing that assess the happiness of the population have shown little movement over the past 30 years. We have become a more unequal and divided society. Levels of personal debt are unprecedented, and we are time-poor, working long hours to make ends meet.

Alongside economic insecurity, a new set of social problems has emerged: widespread mental ill health, systemic loneliness, growing numbers of psychologically damaged children, eating disorders, obesity, alcoholism and drug addiction. The Sainsbury Centre for Mental Health has calculated that the total cost of mental illness to the economy is ?77 billion a year. About 40 per cent of disability is due to mental illness. Stress, anxiety and depression account for a third of all working days lost. The incidence of alcohol-related sickness and alcohol-related deaths continues to rise. We are living in a social recession, its symptoms and pain often concealed inside our homes, where we experience them as our own shameful and personal failings. Its principal cause is liberal market capitalism.

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Its neoliberalist ideology was summed up in Margaret Thatcher's now infamous pronouncement: "I don't believe in society. There is no such thing, only individual people and their families."

Behind the rhetoric was an ideological project designed to reverse the decline in the profitability of British capitalism. Reforms began to transform the nation state into a new kind of market state, an enabler of market provision and an enforcer of market values. What gave neoliberalism a popular resonance was its claim to enhance individual freedom. The idea of personal choice chimed with the aspiration to make a life of one's own.

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But neoliberal individualism lacked an ethical stance of obligation towards others. The public good was dismissed as meaningless. To maximise individual freedom the market must be extended to all areas of life. What matters is what can be counted: price, cost and money. Individuals are reduced to economic units calculating their rational self-interest. Price and its proxies, such as targets and performance indicators, displace values of trust and association as the means of governing people.

Neoliberalism undermined the social nature of individual relationships and broke apart the network of social ties that constituted the public realm.

Democratic institutions unable to reform along with the new individualism began to atrophy. Political parties, products of an era of mass class formations, were increasingly unable to engage with the diversity of everyday life. This is the world that shaped new Labour.

Unable and unwilling to build a counter movement to the historical forces of liberal market capitalism, new Labour made its accommodation with the neoliberal times. Its subordinate social democratic agenda achieved an important reduction in child poverty and significant increases in public expenditure. But its electoral victories were won in part by deepening and broadening the neoliberalism initiated by the 1979 Conservative Government.

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The Good Society , the first of three books in the Compass Programme for Renewal, presents a challenge to neoliberalism culturally, politically and economically. Its guiding principle is social justice, the ethical core of which is equality. Individual freedom grows out of our interdependency, not in opposition to it. We are social and emotional beings who are fundamentally oriented towards and dependent on other people throughout our lives. Our needs and aspirations are formed socially, and we can live together harmoniously only if these can find a high level of fulfilment.

The Good Society is the opening of a public debate about what kind of future society we want for ourselves and for future generations. Academics have played a major part in lending their knowledge and expertise. Compass, operating on a shoestring budget with a DIY philosophy, brought them together in a collective endeavour, and in doing so it unwittingly highlighted the institutional failings of our market-driven universities.

The lively flow and exchange of ideas and the bringing together of theory and practice contrasts with the more conservative and risk-averse cultures of universities.

A growing number of academics are looking outside the official world of RAE-approved journals and conferences for more politically engaged, collective forms of scholarship that will reach wider and different audiences. The open systems of networks and fora created by Compass and journals such as Soundings provide a milieu for this activity. On a small scale, they are able to create the kind of dynamic structures necessary for the emergence of new ways of thinking about society and how we might change it. The Good Society describes a new world in the making; it also prefigures more democratic and cooperative kinds of knowledge-making.

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Jonathan Rutherford is chair of the Compass working group on The Good Society . He is editor of Soundings and professor of cultural studies at Middlesex University. His book After Identity will be published in November. The Good Society is published this week, see