Owen Jones: If trade unions don't fight the workers' corner – others will

Our Prime Minister certainly has few doubts about who's orchestrating the backlash against workfare. "Trotskyites!" Cameron boomed during Wednesday's Prime Minister's Questions; if he'd thrown in "wreckers", it wouldn't have been a bad impression of Andrej Vyshinsky, Stalin's semi-hysterical prosecutor during the 1930s Show Trials.

And yet Cameron barely had time to put down his ice pick before news trickled out that the Government was abandoning sanctions for the work experience scheme. Here was the vindication of that well-known Trotskyist transitional demand: that people should not be forced to work for free against their will.

Workfare is battered, but not defeated. The Mandatory Work Activity (the clue is in the name) and the Community Action Programmes remain intact, all of which compel the growing ranks of the unemployed to work for free or have their measly benefits slashed. But it was a slap in the face for the "protest doesn't change anything" brigade, and another victory chalked up for the burgeoning alliance between small groups of activists and the Twitterati.

The truth is that direct action and social media are filling a vacuum. A coherent opposition to Cameron's Britain is as lacking as it is needed. The Labour leadership is hobbled by the fact that, from workfare to NHS privatisation, they laid the groundwork for much of this Government's agenda. If there's any force uniquely placed to challenge the most far-reaching transformation of British society since the Second World War, it's our trade unions.

On Wednesday, Unite's Len McCluskey was reported as considering plans to disrupt the Olympics. Such was the ferocity of the backlash, you could have been forgiven for thinking trade union plans to kidnap the Royal Family had been exposed, with the proposed campaigning slogan: "Stop the cuts, or the Windsors get it.

The key point McCluskey was making was lost in the outrage: that while the Government had launched an ideological war hitting jobs and living standards, "the idea that the world should arrive in London and have these wonderful Olympic Games as though everything is nice and rosy in the garden is unthinkable."

It's a point that was first drummed home to me late last year when I was talking to school kids in Newham, where the Olympics Village will be largely based. It's one of the poorest boroughs in the country: a stunning one in five people live in households below 30 per cent of median income. The teenagers were angry and, frankly, scared about the bleak futures they faced. Other than a more intrusive police presence, they didn't believe the Olympics would have any impact on their lives.

The cynicism is hardly unjustified. Last month, for example, it was revealed that the contract for printing tickets for the Games would be awarded to a company 4,500 miles away in Arkansas rather than creating jobs here. The Olympics will be an athletic Potemkin Village where we are expected to enthusiastically wave our Union Jacks, grinning ear-to-ear for the benefit of the world's cameras, as unemployment rockets towards three million and living standards plummet at their fastest rate since the 1920s.

But Cameron and the right-wing press saw McCluskey's comments as an opportunity to yet again demonise the trade unions, and they went for it with gusto. Unions are by far the biggest movement in the country, representing 6.5 million members, or about nine times the membership of all the political parties put together. And yet the political and media establishment treat them as though they have no legitimate place in public life. Union members are dismissed as "vested interests", rather than bin-collectors, supermarket checkout assistants, nurses, teachers, and other pillars of any decent society. The Tories routinely deride turnouts in union strike ballots, despite being a party that received the support of just a fifth of eligible voters and yet regards that as a sufficient mandate to radically transform our way of life.

Millions of people have already suffered because of how weak our unions are. As Tony Blair once boasted, our laws are "the most restrictive on trade unions in the Western world". In the four years leading up to the collapse of Lehman Brothers, the real income of the bottom half was already flatlining; it actually declined for the bottom third. Yet bosses' pay continued to boom. Even during the current crisis, boardroom pay for the top 100 companies soared by nearly half last year, while the average Briton is hit with a real-terms pay cut. If we had stronger unions who could stand up for their members, hard-pressed workers would have a shot at getting their fair share.

But if unions are going to take on the mantle of opposition, they're going to have to change. Just as the Tories tapped into resentment among the working poor towards the unemployed using the benefits cap, they tried to turn private sector against public sector workers over pensions. Unless unions organise, this policy of "divide-and-rule" will be devastatingly effective. After the kicking they've received since the Thatcher era, unions have been driven into a public sector stronghold: only around one in seven private sector workers is a member. Unions have to adapt to the fact that work is ever more insecure, and a worker might have to jump from job to job several times in a single year. They can't just organise in the workplace anymore. Unite – the biggest union – is now putting its toe in the water of community organising; a start, but there is so far to go.

If unions aren't going to be caricatured as sectional interests, blindly standing up for their members whatever the cost to the wider community, they need to talk loudly about issues that affect working people more broadly, unionised or not. The assault on the NHS is one striking example; so is the freezing of tax credits, or the scrapping of the Educational Maintenance Allowance. Unions should be the loudhailer for communities across the country being pummelled by austerity.

And it's up to trade unions to force Labour to do the job it was founded for: fighting the corner of working people in the world of politics. In the New Labour era, there were many Labour MPs who would have voted for the murder of the first-born if Blair had requested it; partly, that's because unions helped parachute lobby fodder into safe seats just because the candidate happened to be a member. The working-class Parliamentarian is an endangered species, and it's up to unions to force an increasingly middle-class Parliamentary Labour Party to actually reflect modern Britain.

We've seen the power of angry tweets and a few placards parked outside Tesco. The Government has been sent into a humiliating U-turn. With a bit of strategic nous, unions could break out of the marginalised fringes where they've long been confined and unite opposition to austerity. Frustration is rising: if the unions don't tap into it, then somebody else will.