With the White Paper heralding greater use of selection less than a month old, she hit out at a system which "restricts choice for the majority of children".
Ms Kennedy, delivering the Lord Alexander memorial lecture at the Society of Education Officers' summer conference, said arguments by ministers that selection would raise standards were flimsy.
She called their strategy "the cousin of the trickle-down monetary system" - the theory being that "if the best schools have to jockey for the best pupils, competition will raise standards and even the losers will be improved in the process".
But Ms Kennedy, a practising barrister who is close to Labour, said: "That theory is flawed. The market can't transfer into areas of public service. " Debate around education, she said, played on the fears of parents about what the future might hold for their children.
"Looking after number one has been promoted to almost religious status . . . but the public yearn now for something more than the naked individualism that has been the over-arching ethos in recent years."
A past president of the North of England education conference, a member of the National Commission on Education and now chair of a Further Education Funding Council inquiry into widening student participation, she placed education at the heart of a programme to revitalise the country.
"The role of the school in the community is the drum that we must beat, " she said during the lecture in tribute to Lord Alexander, the general secretary of the now defunct Association of Education Committees who died three years ago and who was widely held to be one of the most influential figures in post-war education.
"Schools and colleges are the heart of our communities and we undermine them at our peril. If we want to recruit stronger communities then we have to cherish and nurture our schools and we have to resource them. It is time again to talk about the ideal of a just society and how it can be created."
Ms Kennedy criticised the denigration of teachers and the under-valuation of people giving good public service via professions such as education, health care and social services.
She said the assault on comprehensives started with grant-maintained status and the stick now used to beat them was often the performance of schools in extremely deprived inner London boroughs .
"There have been notable failures in the comprehensive system where schools have been badly managed, where the quality of teaching was abysmal and the experience of pedagogy useless.
"But there are many successful comprehensive schools, well supported by their local community and successful in promoting high levels of achievement in children from all social classes."
Ms Kennedy said the idea of doing public good - "which seems to have been abandoned in the spirit of competition" - had to be reinforced and the culture of contempt for young people challenged.
"We are too ready to see children as under-performing adults when so often it is adults who are under-performing children."