You know everything's fine and dandy when your patron saint ends up dead on the floor of your national theatre. Flags out everyone, all together now: "Land of Hope and Glooooo-ry…"

Taking his lead from a Russian allegory in which a malevolent dragon king stands for tyrannical Stalinism, playwright Rory Mullarkey reframes our national myth to recognise that the powers that oppress us change over time. John Heffernan's pristine Saint George – plum-voiced, flaxen-maned and, deep down, just a boy, standing in front of a girl etc etc – repeatedly rides in to rid this little land of its dragons, whatever shape they take. Julian Bleach instills them all with the sort of camp villainy that tents its fingers and speaks in a sneer.

Each act trips forward an era, so that a cod medieval legend with dirt-faced yokels quivering in fear of a bejewelled feudal overlord (dragon) repeats itself as an industrial revolution revolt; proletariat workers ripping up the rule book of their exploitative gentleman capitalist boss (dragon). Fast forward once more and George finds himself adrift in our own era of rampant individualism – another age of apparently unscalable (arf) inequality. Only this time the people themselves have adopted dragonly ways, ingesting the ideals of neo-liberalism and consumerism. Destroying that would entail, at some level, eradicating themselves.

Mullarkey pins down the way establishment power evolves, entrenching its position with increasingly complex systems, but also its knack for projecting an aura of invulnerability, Wizard of Oz-stylee. Bleach's monarch insists he's an all-powerful monster when, in reality, he's a just a man with a metal hoop on his head.

It's not the first play to imagine a legendary figure in the modern world. Adrian Mitchell's Tyger – a famous NT flop – let William Blake loose in London, while Patrick Marber dropped Don Juan into modern day Soho. The danger, as it proves here, is glibness on two fronts – a pat version of the icon in a simplification of the city. Heffernan's George is a well-meaning, but patrician, fool with the sort of smile that could captain the school football team. He's best in a pub scene, drunk and disorderly, and rallying football fans that have grown accustomed to failure. The England around him, however, is a all a bit Olympic Opening Ceremony. Mullarkey rose-tints the past and goes misty-eyed for the people.

It's a play that wrestles with its relationship to patriotism – proud of British values but, like Emily Thornberry, uncomfortable with the flag. It's equally conflicted about contemporary capitalism, and Mullarkey recognises the system that built a modern world can, in the process, hold back the people. It's a double-bind that defeats Saint George – ours is a world without heroes or morals.

However, the play itself is just as conflicted, stranded between its own implicit irony and an attempt at guileless innocence. On the one hand, it's a sodding, stupid-ass knight's tale – ticking off tropes with its tongue in its cheek; a mockery of that schoolboy classic Reverend James Yeames' Sir Gawain and the Green Knight. At the same time, wanting us to heed its message, the play speaks so straightforwardly that earnestness creeps in.

Lyndsey Turner's production can't decides whether to send itself up or not; neither silly enough to raise riotous laughter, nor serious enough to push past naivety. Only a few actors negotiate that balance; Gawn Grainger as a doddery old dad and Richard Goulding as weasel-like underling that repents.

Rae Smith's imaginative staging honours its childlike nature with a model town England dotted with pop-up book buildings. Bleach painted cottages and line-drawn factories with real smoking chimneys are replaced by the sort of cardboard-kit skyscrapers you can buy in the NT's own bookshop. It just goes to show: even the theatre's entangled. This could all be mightier yet.

Saint George and the Dragon runs at the National Theatre until 2 December