Leader: Occupy St Paul’s shows something is rotten in the state of Britain

When a few thousand protesters set out to occupy the London Stock Exchange on 15 October, much of the political establishment regarded the event as an anarchists' day out. Two weeks on, it is a testament to the success of the protest that few are now so dismissive. No one who has visited the camp outside St Paul's Cathedral can fail to be moved by the protesters' wit and ingenuity. Even those who disagree with their tactics concede that they have articulated a growing sense that something has gone badly wrong.

The compact on which a fair society is predicated - pro­portional reward for proportional contribution - has broken down. Even as profits have fallen and shares have plunged, FTSE-100 directors have been rewarded with a mean pay increase of 49 per cent in the past year, compared to a 2.3 per cent increase in average earnings across the economy (inflation is running at 5.2 per cent). The unacceptable face of capitalism, to borrow Ted Heath's phrase, is ever more visible. For this reason, unlike the anti-Thatcher crusaders of the 1980s, the protesters enjoy the sympathy of the political mainstream. That they are part of an unprecedented global movement lends their cause further legitimacy.

The Church was initially impressive in its response: Giles Fraser, who subsequently resigned as the canon of St Paul's, insisted on the right to peaceful protest. Yet it blundered when it closed the cathedral on spurious health and safety grounds. The Archbishop of Canterbury, Rowan Williams, spoke of how "decisions made in good faith by good people under unusual pressure can have utterly unforeseen consequences". On 2 November, he called for the introduction of a global tax on financial transactions as one of several measures to reflect "the moral agenda" of the protesters.

Haunted by the spectre of the 1980s - when Labour was marginalised as a party of protest - Ed Miliband has avoided engaging with the movement. But he should not miss the opportunity to channel its anger into a coherent political programme. As his deft response to the phone-hacking scandal demonstrated, there are gains to be made when the normal laws of politics are suspended. Mr Miliband should lead calls for the democratisation of the secretive and unaccountable City of London Corporation. In so doing, he can draw inspiration from some of his forebears. As the Labour MP Jon Cruddas noted in his Attlee Memorial Lecture (discussed on page 11 in our new Observations section), it was the former Labour prime minister who declared that the City of London was a "convenient shorthand for a collection of financial interests . . . able to assert itself against the government of the country".

Mr Miliband was ridiculed for his division of businesses into "predators and producers" but his yearning for a better, more ethical capitalism is widely shared. The question facing social democrats in the UK and elsewhere is how to redistribute wealth in an age when capital is so mobile and the rich are so adept at avoiding taxation. A progressive solution, as we have long argued, is to shift the burden of taxation from earned to unearned income; from taxes on income and consumption to those on assets: inheritance, property, land, and so on. Not only would such taxes be harder to avoid - mansions cannot flee to Geneva - they would also reduce the distorting effect that property speculation has on the economy.

The subject of inequality, for so long treated as a parochial concern of the left, is finally receiving the mainstream attention that it deserves.

This article first appeared in the 07 November 2011 issue of the New Statesman, The triumph of the Taliban