Labour's values count even more in hard times. David Cameron has to agree: this could be a tipping point for fat cat Britain
Political ideas shift slowly, until a tipping point sets off an avalanche. For years many of us have pointed to obscene top pay as the tip of an iceberg of corrupted capitalism: now even David Cameron sees something must be done. On Tuesday Ed Miliband addresses London Citizens, the community organisers for a living wage, promising a fairer capitalism.
That's the classical path of progress. The unthinkable is dismissed as blue-sky nonsense, but persistence moves the ice floes of public opinion. From factory acts and boys up chimneys, to income tax, pensions, NHS, abolition of the death penalty, human rights, divorce, abortion, anti-racism laws and the smoking ban, all were won against the odds. It took from 1909 to 1948 for Beatrice Webb's minority report to become the welfare state: against the drag-anchor of conservatism, campaigns for social justice usually win eventually. The broad sweep of history raises optimism. That's why the left is essentially optimistic, and the right better-yesterday pessimists, feeling that anchor dragged unwillingly towards progress.
But in recent decades Britain's story has not always read that way, under a more brutal brand of capitalism. For 100 years incomes grew more equal, but since the 1980s that has gone into reverse, often in leaps and bounds, as the big bang blew the lid off top pay, trade unions lost strength to prevent half the population's incomes stagnating, and unchecked property bubbles accelerated wealth difference. Economic fatalism was law: governments must never interfere, markets are sovereign and politics effectively dead. Cameron held that line: lay a finger on capitalism and the golden goose gets it. That makes this tipping point so important: now he admits the deformities of "crony capitalism" there's no going back. The question has changed to who can fix it, and how.
Miliband owns this turf: he earned it with his conference speech, considering the contempt from Cameron's press and Blairites fearing he'd fatally broken the New Labour formula. Now he says he is breaking with that Labour past, and Cameron's present. There is nothing anti-business about cleansing cheats, asset-strippers and vultures from honest savings and good business enterprise: Cameron has been forced to agree.
How has this change happened? UK Uncut's pithy demonstrations at TopShop and Vodafone graphically exposed tax avoidance. The Guardian's Tax Gap series on companies avoiding £25bn tax through havens and loopholes provided facts. Occupy captured a public anger that conventional politics ignored. The High Pay Commission, set up by the left-leaning thinktank Compass, proved hugely influential, as did Will Hutton's report on high pay in the public sector, blaming City contamination. London Citizens galvanised communities. Avaaz and 38 Degrees with their petitions raised the decibels. Drip, drip, drip, the ice thaws, and the outlandish becomes conventional when working with the grain of public opinion.
Miliband's message today is important. Social democratic values are more vital in hard times when there is no money. How you share diminished resources matters more than how you share a growing cake. Labour always said cuts were inevitable, and now there is less money since Osborne stifled growth and added to the deficit. Hard choices for how we tax and spend need social democratic priorities: we are not all in it together when I get un-means-tested winter fuel payments, free travel and heavy pension tax relief with no perceptible cuts.
Cynical political calculus says my generation votes most, so let families with children take the hardest knocks. In good times Labour accepted a corrupted capitalism that delivered taxes, focusing on redirecting proceeds to soften the impact of that unfairness. Now there is no growth, Miliband says those malfunctions need to be corrected at source.
HM Revenue and Customs is about to report that Labour's 50p tax rate – alas introduced too late in the day – is yielding rich returns: so much for the debunked Laffer curve theorists who said it wouldn't. But even so, more of the burden needs to be shouldered by the top 10% for as long as the other 90% are suffering most. Equality matters not just for fairness, but for higher growth and productivity. The Nordics and Germany flourish in contrast to the dysfunctional UK because our wealth distribution is among the most unjust: so finds the latest report from the OECD, the hard-boiled economic thinktank not known for leftist thinking. Here's fertile ground for Miliband's "responsible capitalism" that challenges "vested interests", such as the near-cartels of rail and energy industries. He plans early intervention to stop runaway theft by the few, shifting resources to home-building and growth creation. Will the other side mock as loudly now? Or will it recognise he was right in his conference speech, and he's right again now?
Cameron talks one way and walks the other – on greenery, poverty, social mobility. But this time, with a public searchlight on bank bonuses and boardroom pay, he will have to deliver. Too afraid of City power, Blair and Brown refused even to murmur words of disapproval at top pay. But threats, scrutiny and cajoling from a Conservative prime minister may just alter the boardroom climate: governments underestimate the cultural force of naming and shaming these panjandrums of greed.
If shame fails, then Cameron's proposed remedies are weak. As tax expert Richard Murphy says, shareholder power is a dead duck. Growing numbers of shares are foreign-owned, at 41%. Insurance companies hold 13%, pension funds 12% and individuals 10%. Most traders have zero interest in nurturing companies: some only own them for an electronic micro-second. Worthy, if mildly eccentric shareholders at AGMs are tolerated, given sandwiches, and then massively outvoted by unseen traders, cronies in the universe of greed.
Miliband is adopting all the High Pay Commission's proposals. If Cameron's plan fails to curb excess, Miliband must go further. He should certainly support those dangerous lefties, Merkel and Sarkozy, on the Robin Hood transaction tax: watching them go it alone shows how wrong Cameron was to claim this was an EU conspiracy against the City.
Hard times need create no "crisis of social democracy". In Attlee's postwar days of atrocious austerity, Labour produced its best policies – and so Miliband lays out reasons why fairness matters most when money is short. His "responsible capitalism" may look ever more essential by the end of this economically threatening year.
Twitter: @pollytoynbee