The Lib Dem leader said on Thursday that the opportunity was rife for his party to replace the government as the most progressive force in UK politics.
Writing for the thinktank Demos in a pamphlet entitled The Liberal Movement, Mr Clegg said that Labour's way of thinking had been exposed as 'fundamentally flawed'.
He said that 'state-centred, top-down solutions are wholly out of step' with today's fluid micro-societies.
'Labour's basic approach to governance to social, political, economic and environmental progress is fundamentally flawed,' he said.
'Its starting point is central state activism, its defining characteristic is the hoarding of power at the centre, and its method of delivery is top-down government.
Drawing parallels with the way in which Labour emerged as the prime progressive force against a divided Liberal party in the early 20th century, Mr Clegg added: 'The speed with which the Labour party eclipsed the Liberal party in the early part of the last century was, in large part, because Labour better understood the need for such collectivist responses, especially at a time of war, and an internally divided Liberal party did not...
'Only liberalism possesses a clear understanding of the way in which power has flowed upwards and downwards from the central state. Only liberalism marries a passion for devolution within Britain with a commitment to international institutions and the international rule of law.'
The Lib Dem conference begins on Saturday.
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