John Osborne’s 'The Entertainer' is back, bang on cue: a play in which the nation frets about immigration (“Bloody Irish! Bloody Poles!” cries one character) and our uncertain place in the world (“People seem to be able to do what they like to us”). What kind of a country is Britain, the play asks, what is to become of us?

A new Kenneth Branagh production opens next week, nearly 60 years after its first appearance in 1957. Back then, the Suez crisis had administered a shock to the national psyche that would not be equalled until Britain’s decision to leave the EU. Rarely had a theatrical work been so eagerly anticipated. 'Look Back in Anger' had strutted on stage at the Royal Court the previous year and declared war, not only on the establishment but on the British theatre. The French windows of the standard West End play were unceremoniously kicked in as gobby, snarky, grand-standing Jimmy Porter took centre stage to tell it like it was. Battle lines were drawn.

The controversy was helpful to sales. As Osborne himself so succinctly put it, the theatre is a minority art with a majority influence: the very existence of Jimmy holding forth with furious eloquence created a stir out of all proportion to the number of people who had actually seen the play. Among those who took the trouble to do so was Laurence Olivier, ever on the qui vive for something new. He was not impressed: “It’s just a travesty on England,” he told Arthur Miller, whose wife, Marilyn Monroe, he was directing in 'The Prince and the Showgirl', “a lot of bitter rattling on about conditions.”

Meanwhile, the rest of the theatre world was waiting to see what Osborne would write next. He was quietly developing the idea for a play in which the music hall would become a metaphor for the nation: the decline and fall of the Holborn Empire would mirror the decline and fall of the British empire. “The music hall is dying,” he wrote in his author’s note to the published text, “and, with it, a significant part of England. Some of the heart of England has gone; something that once belonged to everyone, for this was truly a folk art.”

The play is set in one of the coastal towns that Osborne knew so well from his rep days – he wrote 'Look Back in Anger' in Morecambe – and featured a warring and unhappy family whose breadwinner, the drama’s central character, is a third-rate comedian, Archie Rice. At one time a star, Archie’s old dad, Billy, gives voice to the playwright’s aching sense of Britain’s decline. Though Osborne aligned himself with the leftwing causes of his contemporaries at the Court, he was deeply, romantically, almost aggressively nostalgic for a time when life was better, when people like him felt normal and in the right. “I feel sorry for you people,” Billy tells his grandson. “You don’t know what it’s really like. You haven’t lived, most of you. You’ve never known what it was like, you’re all miserable really.” The representatives of the younger generation, Archie’s son and daughter, angrily fight Jimmy Porter’s corner, if in muted form. But Archie himself is possessed neither by nostalgia nor anger: he is and knows himself to be clapped-out, shifty, empty. “What do I care?” he sings as part of the tacky routine he performs, knowing even as he goes through the motions that the game is up and there is no place for him in the modern world. But what else can he do? The show must go on, even if no one is there to see it. The idea for Archie came to Osborne watching a comic ramping up a mediocre impression of Charles Laughton as the hunchback of Notre-Dame one afternoon at the crumbling Chelsea Palace of Varieties in London. “There’s a kind of heroic, suicidal nobility,” he wrote, “in a bad comic who goes onstage to face certain derision.”

Osborne had written just about half the play when Miller took himself, his wife and a deeply resistant Olivier to see 'Look Back in Anger'. Miller was fascinated by the play. Olivier still didn’t get it, second time around, so Miller was astonished to hear him say to the young author when they went backstage: “Er, you’re not writing anything that might have the littlest opportunity for … well … me … are you?” Osborne showed Olivier the first act of 'The Entertainer'. He was immediately drawn to the part, not of Archie, but of Billy, whose sentiments he shared. He swiftly changed his mind. For some while he had been looking for a way to reinvent himself: how better to smash the image of the classical actor and ageing romantic lead than by crooning and hoofing and telling off-colour jokes? He desperately wanted to be part of the latest thing, whatever it was, and if doing so meant he could steal a march on his peers – the Gielguds and the Richardsons and the Guinnesses – then so much the better. What didn’t seem to interest Olivier too much was what the play was actually saying. He himself was unthinkingly conservative, God-fearing, law-abiding and patriotic. He objected to certain anti-monarchy lines, which he had cut when the play transferred to the West End, but it seems he saw it not as a state-of-England play, but as the personal tragedy of Archie Rice, with which he identified strongly. There was something of Archie in him, he told the Daily Mail. “It’s what I might so easily have become.” Standing in front of the footlights in his mask-like makeup at a technical rehearsal, he said to William Gaskill: “It’s me, isn’t it? It’s me.”

Olivier’s Archie presented mid-century Britain to itself in all its tarnished, seedy, impotent dishonesty The production was exceptionally well cast, with due deference to the star. Billy Rice was played by George Relph, an old chum of Olivier’s, a very young Richard Pasco played Archie’s son, Frank, and Dorothy Tutin (Olivier’s lover at the time), was cast as his daughter Jean. The Royal Court management was keen that Phoebe, Archie’s neglected and rather plain wife, should be played by Vivien Leigh, Olivier’s demanding and very beautiful wife in real life; she was at the time battling with bipolar disorder. Olivier swiftly scotched the idea, even in the face of a suggestion that she could wear a rubber mask to disguise her beauty. Brenda de Banzie, who had earlier played opposite Olivier in 'Venus Observed', was duly cast in the part, but Leigh sat in on rehearsals until the unending stream of helpful comments emanating from her began to be distracting, at which she was removed. Tony Richardson, George Devine’s associate at the Court, whose instincts for what would be successful were somewhat in advance of his gifts as a director, presided over all this. He staged the sprawling play efficiently enough, though he was not always able to help Osborne reconcile the opposing demands of rhetoric and form in the play, any more than he had been in 'Look Back in Anger'. It was a good show, however, with witty and accurate designs by Alan Tagg and a brilliant pastiche score by John Addison. In 'Look Back in Anger' jazz is the defining music, but in 'The Entertainer' it is the blues.

The first night was unusually fraught; Osborne had been in the law courts all day, divorcing his first wife. Olivier had written to him to thank him for giving him such a wonderful part, and hoped that he didn’t “fuck it up for him”. On the contrary: he gave what many people felt was the performance of his life. It is not given to many actors to embody the zeitgeist: Olivier’s Archie presented post-Suez, mid-century Britain to itself in all its tarnished, seedy, impotent dishonesty, surgically exposing all the pain that lay behind it. He spoke for England, as he had done before, when he had played Henry V on stage. Laughton had gone backstage and asked him: “You know why you’re so good in this, Larry? Do you? It’s because you are England.”

The reviews were fairly unanimous about the quality of Olivier’s performance; the combination of tacky brilliance in the front cloth numbers (fruit of his close observation of comedians such as Max Miller and his hero Sid Field) and emotional nakedness in the domestic scenes was overwhelming. The play itself was less warmly received: “Mr Osborne has had the big and brilliant idea of putting the whole of contemporary England on one and the same stage,” wrote Kenneth Tynan, “he has bitten off, in this broad new subject, rather more than he can maul.” He added, the author seemed unable to write convincing parts for women: Jean was “vaguely anti-Queen and goes in for loose generalities like ‘We’ve only got ourselves’; beyond that, nada. Rather than commit himself, Mr Osborne has watered the girl down to a nullity.”

Max Wall’s Archie revealed the romanticism of Olivier’s approach: he drew a tragicomic portrait of a soul in hell Great part, mediocre play: this has, with variations, remained the verdict of history. Interestingly, only two years after Tynan’s influential first review he saw a production of it in Hamburg, and revised his opinion: the great actor Martin Held played Archie quite differently from Olivier, as a German cabaret MC, “cruder and sweatier than Olivier, and drunker, too, in a stiff-backed, stolid way, emphasising his jokes with a ghastly, crowing laugh”. The result, wrote Tynan, was that the play took on much more cogency and shape; Jean became a central figure. Such thorough-going reconsiderations of the drama have been rare; only one British actor in living memory has effaced the imprint of Olivier, and that was the great comedian (and novelty dancer) Max Wall, who played Archie in Osborne’s own perhaps over-loving 1974 revival at Greenwich theatre (it lasted nearly four hours).

As if in a negative image, Wall reversed Olivier’s conception. In the front cloth scenes, Olivier showed a 10-rate performer who, despite a lack of talent, was eager to make an impact. In the private scenes, he exposed the man’s despair: when he showed Jean his dead eyes, they were in fact shot through with excruciating pain. When Wall played the same scene, his eyes were unnervingly dead; during the scenes in the music hall, he presented Archie as effortlessly skilful but deeply bored, just sketching it in. He nonchalantly knocked off a few steps, full of contempt for his audience, whereas Olivier put everything he had into the dancing. Wall’s performance revealed the full-blown romanticism of Olivier’s approach: he drew a tragicomic portrait of a soul in hell. Wall’s Archie was flatly realistic, and all the more disturbing for that. The man was a dead cinder. The performance made the play seem smaller, less epic, but in some ways better, more real, less schematic. It was less entertaining, and more disturbing.

Such are the swings and roundabouts of theatrical production: just as Edith Evans by sheer force of talent made Lady Bracknell the focal point of 'The Importance of Being Earnest', unbalancing it, Olivier’s Archie to some extent overwhelmed 'The Entertainer'. But who would have been without that performance? Olivier was remade, and moved on to ever greater heights. Nothing in Osborne’s subsequent work ever made quite such an impact, but, as he wrote to Devine: “I shall go on writing plays and play my part in all the things that need so desperately to be done. As George Goetschius would say: ‘Our world will come.’ But it’ll have to be fought for, and with everything we’ve got.” That he certainly did.

• The Entertainer is at the Garrick theatre, London WC2H, from 20 August. branaghtheatre.com