Chutzpah, classically exemplified by the parent-murdering child who pleads for mercy on the basis that he’s an orphan, is surely now epitomised by Kevin Rudd, Party Reformer.

As any number of observers have pointed out, it’s rich indeed for the man who ran the most centralised, control freak prime ministership in Australian history to discover the importance of the party’s (rapidly dying) grassroots. This isn’t the first time Rudd has raised the standard for party reform since he lost the prime ministership. But yesterday he defended himself against criticism of his own performance as prime minister by citing as his own contribution to party reform taking the power of selecting his frontbench away from Caucus. That was a true “I’m an orphan” moment.

That a politically expedient power grab by then-opposition leader Rudd — under pressure from John Howard and Peter Costello about who would be his treasurer — is supposed to count as a major step toward empowering the party membership is one of the funnier jokes from a bloke not renowned for his scintillating wit.

But putting aside the authenticity of Rudd’s Damascene conversion to the cause of internal party democracy, the problem for Labor is that Rudd’s basic logic is correct. The current debate over party reform and how much of the institutional architecture of the party should be elected by the membership misses the point of the long-term crisis Labor faces. The major political parties are battling the tide of history in trying to cling on to the vestiges of the mass membership bases.

Rudd is wrong to suggest this is purely a problem for social democratic parties — the decline of participation in social institutions and the outsourcing of politics to a professional caste is a phenomenon at work across politics in anglophone countries, and probably in Europe as well.

In the last 10 years, the decline has been paralleled by the rise of online communities, with internet users establishing their own communities of interest and forms of activism that are entirely the opposite of the bureaucratic, hierarchical structures of mainstream political parties. Political parties now find themselves on the wrong side of history as the internet rewires the way we form communities and build social capital.

In this context, Rudd’s argument for full power to the party grassroots, electing all the major positions and the national conference, and even leaving the door open for election of the parliamentary leader, is not so much a radical outlier in the debate as a single, first step toward a program of salvaging the party. A proper engagement with the challenge confronting mainstream political parties would look not merely at issues like online membership but entirely relocating the party online, establishing a genuine, permanent conversation across the party and even contemplating how representative MPs should be on specific issues. It’s fundamental stuff and it requires hard thinking about not just party politics but what politically-engaged voters want.

And needless to say, none of it will produce comforting answers for those currently holding positions of power, or who regard the process as primarily about the distribution of spoils.

The issue is complicated by the fact that not everything is broken within the Labor Party. However derided, trade unions provide a real world connection and policy grunt — as well as more prosaic things like cash — for a party that too frequently and accurately is accused of lacking, or being too willing to discard, core beliefs. But like political parties, unions are on a slippery slope of declining participation, and face exactly the same challenge of adjusting to a rewired society.

Finding a way to re-establish the party on the right side of history while preserving a link to trade unions is the challenge to which Labor should be fronting up. Instead, this weekend it’ll be engaged in fierce debate about the order of the deckchairs on the Titanic.