There has never been a time when we needed radical political theatre so urgently but, suddenly, it is in short supply. Steve Waters's play about free schools, Little Platoons, arrived at the Bush Theatre, London, this year to remind us what it looks like and to show us what it can do in the Cameron era. But, after 30 years of neo­liberal government, perhaps theatre has given up hope of changing the world. Whatever the reason, politics is not the inspiration for most new writing and, where it is, politics too often seems to edge out the theatricality, as though the two cannot coexist.

Live theatre, however, can be a serious political force - more so than more popular media, such as cinema. We remember 1956, the pivotal year of the 20th century, not just for Suez, the invasion of Hungary or Khrushchev denouncing Stalin, but for John Osborne's Look Back in Anger, which tells of all that was mean and greedy about the 1950s.

Intolerant as they were, the 1950s were very tolerant towards sadistic teachers, domestic violence and racism. It was a world in which, as Jimmy Porter, the main character of Look Back in Anger, puts it, "Nobody thinks, nobody cares"; or, in the words of the young man who is about to go to fight in Suez in Osborne's next play, The Entertainer: "Things aren't that bad and, even if they were, there's nothing we can do about it."

Before 1956, political theatre tended to mean such rubbish as William Douglas-Home's 1947 play The Chiltern Hundreds in which an uppity socialist is defeated in an election by a Conservative butler. Democratisation began with the unlikely figure of Brian Rix, who worked out that there was a proletarian audience to be won: local clubs and pubs would put together sufficient people to earn a discount at the box office. His play Reluctant Heroes, staged at the Whitehall Theatre in 1950 (the first Whitehall farce), shows the working-class soldier giving the officer class its comeuppance.

Arnold Wesker's angry plays about social injustice were the most radical of post-1956 theatre. He represented the hopelessness of a generation whose good, brave cause had been taken away. His trilogy, Chicken Soup With Barley, Roots and I'm Talking About Jerusalem - first performed between 1958 and 1960 - follows the life of a communist Jewish family in the East End of London from hope in 1936 to despair in 1956. Wesker showed us why we needed communism and why it wouldn't do.

In Chicken Soup With Barley, as the cold winds of 1956 blow around Sarah's communism, she becomes the spokeswoman for a generation who had seen too much to change. Her son says, "You're a pathological case, Mother, do you know that? You're still a communist!" Yes, she says: "All my life, I worked with a party that meant glory and freedom and brotherhood. You want me to give it up now? You want me to move to Hendon and forget who I am?"

Wesker's The Kitchen (1957) and Chips With Everything (1962) are angry, socialist statements about working-class life turned into urgent theatre. Chips With Everything may have been the last important play to focus on national service. In the Sunday Times, Harold Hobson called it "left-wing drama's first real breakthrough, the first anti-establishment play of which the establishment has cause to be afraid".

In the 1970s came the emergence of politically committed playwrights such as David Hare, Caryl Churchill, Howard Brenton and David Edgar, who, in the 1980s, enabled theatre to rise to the challenge of Thatcherism. Churchill's Serious Money ends with the City traders' anthem for the 1987 general election:

Pissed and promiscuous
The money's ridiculous
Send her victorious for five fucking morious
Five more glorious years.

Its wealthy targets hurried to the Royal Court. Thomas Sutcliffe wrote in the Independent: "It is a bit like going to see The Resistable Rise of
Arturo Ui with a coach party of SS men." Something similar happened in 1985 at a performance of another well-aimed political play, Pravda, written by Hare and Brenton, which shows how journalism had failed in the Thatcher era. Journalists greeted each other in the interval at the National Theatre and laughed as they heard the young journalist Suzie explain what she's working on: "I'm doing pork content in patés. Home and leisure special. We've got four reporters at the Ritz - photo session as well - eating 60 different brands. The whole of the Depth Probe team is on it . . . Funny, everyone used to be so frightened of investigative journalism."

Hare captured the spirit of Thatcherism in plays such as Amy's View (1997), about the ruin of Lloyd's names, and The Secret Rapture (1988), in which a Conservative MP brings her political beliefs and her husband's utilitarian managerialism to bear on her family's life, with appalling results.

We need such plays today. David Cameron is bringing back a welfare system in which wealthy ladies dish out hot soup to the deserving poor and he is calling that a "big society". We are cravenly accepting the idea that the poor will be better off if they are left at the mercy of the rich. The Labour Party is so compromised by the Blair years that it can no longer credibly defend the poor. Some entertaining West End plays satirised Blair and his cronies and established to everyone's satisfaction that the country was being run by a gang of shallow, dishonest narcissists - but they showed no interest in what this was doing to people, their communities and their idealism.

It's true that progressive dramatists such as Hare can still command the biggest stage in the country, the National Theatre, for overtly political work. But they do it differently now. Hare's The Power of Yes (2009) was billed as a dramatic attempt to understand the financial crisis. He did this by interviewing experts. He said it was not a play but a story and he was right: properly subbed, it would have made an excellent New Statesman feature.

In Playing With Fire (2005), Edgar came to the rescue of local government. It is in the interests of both big business and central government to belittle local councils and render them powerless, and they have succeeded in destroying local democracy. Edgar is right about that, but his play sounds, at times, like a speech to the annual conference of the Local Government Association.

Hare's The Permanent Way (2003) is verbatim theatre, linking rail privatisation and train crashes through first-hand accounts by railway workers, passengers and government ministers. Hare didn't so much write as edit it. Much of the best verbatim theatre is by good journalists who have written no other drama, such as Richard Norton-Taylor (author of plays about Bloody Sunday and the Iraq war).

In The Permanent Way, Hare writes: "What belonged to [the people] was taken from them by a bunch of bankers and incompetent politicians. What was theirs was given away. What was foredoomed to fail failed. Why aren't they angry?" But to make them angry, theatre has to do what Michael Billington once described Wesker's work doing: "[His] great strength is that he allows the politics to emerge through the interstices of domestic life."

Which is what Waters does in Little Platoons. It gets to grips with an idea that sums up the coalition government's philosophy - so-called free schools. It's a play first and a statement second. There is not a single character who is a cardboard cut-out, not one who's there just because the author needed someone to say something. Each of them is multilayered. There's no cheating: Waters doesn't make the most sympathetic characters take the view that he wishes the audience to adopt. The argument against free schools is expressed by the least likeable character in the play.

Here's how an idealistic comprehensive schoolteacher is converted to selection when it comes to her own child: "If we don't filter these applications in some way, we'll have a world of woe coming through that door." Just a year earlier, she'd have been arguing that, if a school takes all the children who are easiest to teach, the neighbouring school is being fitted up for failure, along with a generation of poor children. When, finally, the author says where he stands, there is no sense of being preached at, just relief that someone is saying it:

I want us to get off our knees, I want to fight for what we fought for, our parents fought for, I want to defend every benefit and every year at school and every free place at uni and every bit of social housing and every park and public holiday . . .

Hurrah.

Steve Waters's "Little Platoons" will be broadcast as the Saturday Play on Radio 4 on 18 June