Few people will have been looking forward to the end of 2011 more keenly than the Gillard government, and the rather-less-than-mighty Australian Labor Party. Indeed, the only thing that might have dissuaded them from celebrating is the possibility that this year might be worse.

Labor was already reeling from a plummeting primary vote, the difficult passage of a carbon tax, and a bruising encounter over same-sex marriage. Then the week before the Christmas break delivered the coup de grace - the sinking of a second asylum-seeker ship, with the loss of more than 100 lives, seeming to offer proof positive the government had failed at what was apparently the supreme goal of refugee policy - stopping the boats.

The blame for this catalogue of woe has been shunted home to the government, with Prime Minister Julia Gillard acquiring the reputation of being a Midas-in-reverse - everything she touches turns to crap.

This judgment has become such an article of faith among expert Australian political commentators that we can have utter confidence in its falsehood. Even the most inept performance in day-to-day politics, of which there have been ample instances, could not explain the ALP's shaking foundations. Gillard has had the misfortune to preside over a Labor government at a moment in history when the social and political ground is shifting beneath it, and at a time when Labor is led by people unable or unwilling to think these changes through.

There's one obvious reason as to why Labor's primary vote has collapsed, while its two-party-preferred vote remains competitive, if sluggish, and that is the rise of the Greens as a third force. But focusing on the Greens is only an example of mistaking effect for cause and missing the real issue.

In the past 15 years, the Greens have increased their vote by permanently removing a whole chunk of leftish voters and activists from the ALP. Labor has succeeded through its ''Whitlam coalition'', where ''inner-city types'' have attached themselves to the party, but also subordinated some of their social demands to the conservatism of a larger part of the party: the suburban working and middle classes. But that contract only works when one part lacks clout, that is, when they are too small to be considered a social class in their own right. In the past 25 years, however, the ''inner-city trendies'' have ceased to be marginal and have become central to the economy as the knowledge/cultural production class.

Yet as that class - designers, content creators, teachers, policymakers, social professions, students - has detached from Labor, something else has happened to its working/middle class suburban base. In the years of the Whitlam coalition, they were as interested in collective social change as were the ''trendies'', and so the two bases of the party could work together.

Now, as Greens voters grow keener for collective action - on climate change, for example - Labor's base has gone in the other direction. They have become increasingly interested in managing their lives on an individual basis. The Whitlam coalition has been torn apart by class divergence. Thus, the more Labor tries to ''rebrand'', by defining itself against the Greens, the more it defines itself against its own broad values, those of actively extending equality and rights to larger sections of society.

The ultimate result is a party that has nothing to say to its potential supporters about how it might change their lives for the better. Everything that once comprised the business of progressive politics - how people will live, be cared for when sick, educate their children - Labor has declared a no-go zone for debate, discussion, and radical innovation, limiting itself to small fixes. That would be fine if it were a conservative party, but a progressive party can't not talk about change. So if there are no big questions on offer, small ones will fill the vacuum - and issues such as same-sex marriage and managing a few thousand arrivals by boat move from the margins to the centre, taking on a symbolic role far beyond their social impact.

This approach sells Labor and Australia short. Labor has been a willing participant in a process whereby things that could have been politicised and made a cause for change - an insane housing market that enslaves people to mortgages, an ailing public health system and an education system that entrenches inequality of opportunity - are off the table. That has enabled parties on either side of the ALP to take advantage - the Coalition with its six-month parental leave proposal, the Greens with Denticare.

But even these are piecemeal proposals compared to the sort of things Labor should be raising. For if the country is really so prosperous, surely that would give the opportunity to increase real choices - about what sort of work-life balance people would want, the urban form they might want to live in.

The failure to open up the social debate has left Labor prey to phantoms, and to a hidebound idea of the ''conservative'' social values of their suburban base.

Thus, as some issues have barely moved - attitudes to boat arrivals, for example - others have shifted substantially. The prime example is same-sex marriage, in which the attachment to a conservative form like marriage remains, while broader society has adopted what were once bohemian values. Labor subscribes to the right-wing fantasy of a ''mainstream'' with a stable set of conservative values, in part because the failure to see what is really going on makes it susceptible to easy mythologies. If it could think harder and better about social change, it would avoid embarrassments such as the mess over same-sex marriage.

Whether that can occur without a political disaster remains to be seen. Labor appears to lack the will to do what was once its essential activity, thinking through the social question - in part because it no longer believes there is such a thing, merely a nation and an economy. Its insular culture means every debate on party identity becomes an argument about rules. Its think tanks, with the exception of the Fabians, focus on narrow questions, swaddled in jargon. And the work of Labor-identified intellectuals tends to be shallow academic careerism.

Where did they go, the people whom Labor once relied on for new thinking? They're in the Greens, who buzz with new ideas, policies and proposals. That's easy to see. Where the ideas and thinking Labor needs to reconstruct itself will come from in the future is harder to discern.

Where's Labor's Brain