Labor’s new national president, Wayne Swan, has launched a full-throated defence of progressive taxation, declaring the system is not class warfare, but “created to counter the class warfare that had ripped the world to pieces before, during and after, the great depression”.

After a fortnight in politics dominated by arguments about income tax, and on the same day as Bill Shorten backflipped on a company tax repeal position he’d flagged earlier this week – Swan told a dinner at the New South Wales Labor conference on Friday night the “demolition job on progressive taxation is being sold to us as some sort of mainstream economic solution”.

“Uncontroversial, common sense, accepted by all economists, but it’s anything but that. It’s a radical agenda that will dramatically widen income inequality and strip back the social wage that has defined our country since the second world war.”

“It will take our country right down the American road to a nation of haves and have-nots, forgotten communities, social division and anger – Trump’s America.”

Swan declared on Friday night “the Australian dream” was built on the pillar of progressive taxation. “It’s what helped pay for our successful industrial development from the 1940s onwards, our national infrastructure in the 1950s and 60s, the creation of Medicare in the 1970s, the increases in year-12 retention of the 1980s, the expansion of universities in the 1990s and now the NDIS.”

“Progressive taxation gave us one of the most egalitarian societies in the world. And in Europe, the United States and elsewhere, progressive taxation gave the world decades of social peace and stability. It lowered social tensions and held at bay the dangerous extremes of left and right.”

He says social democratic parties around the world have come under assault from populists on the right and the left, and warns “unless we show we have the answers people are looking for, we could be swept away too.”

Swan says Labor is currently “in a battle of political wills and ideas that will determine the future of our party.

“Our task is to tear down neoliberalism and its trickle-down economics, to argue that inequality is not inevitable, and to prove that our social democratic alternative will create a richer and better society.”

Swan’s speech also contains implicit criticisms of an alternative manifesto outlined this time last week by the left-wing frontbencher Anthony Albanese.

Albanese said the ALP needed to cherish its historical union links, but also appeal to people who were not union members. “This is not 1950,” Albanese noted, “when most Australians were members of trade unions.”

The Labor president says one of the reasons there has been a declining share of GDP going to working people is that the government in Australia “has sought to supress the voice of organised labour.”

“We in this room know that unions are the most effective check on inequality that has ever been invented,” Swan said.

Declaring himself “unapologetic about being on the side of working people” Swan says recent history demonstrates that when parties of the centre-left move away from their base, they lose.

“Insipid and tame economic agendas which fail to provide a clear alternative in the key areas of inclusive growth simply make it easier for right-wing populists to use race and gender to divide and defeat us. That’s the big lesson for us.”

He says politics must be disabused “of the destructive idea that government and collective action by people are somehow illegitimate.

“This stupid idea, endlessly advocated by right-wing ideologues, is what had brought America undone.

“We don’t need it. Instead, we need to convince people once again that collective power, expressed through their unions, their communities and government, funded by means of progressive taxation, can help us solve our country’s greatest problems.”

Swan’s outing on Friday night followed Shorten’s decision to recant a position articulated by him on Tuesday repealing the Turnbull government’s tax cuts for medium-sized businesses, a reversal which followed mounting internal pressure.

Shorten told reporters he’d recommended to shadow cabinet that businesses already in receipt of legislated tax cuts should keep them. He said it had become necessary to “amend” Tuesday’s announcement because it was “causing confusion and uncertainty for business” and because Labor had received updated financial information.

The final decision only covers tax cuts that have been legislated and have taken effect, so that means the Turnbull government’s cut in the tax rate paid by medium sized firms to 27.5% will stay.

A staged tax cut to 25% beyond 2024-25 promised by the Turnbull government will still be rolled back if Labor wins the next federal election.

Pressed on why he’d articulated one policy position on Tuesday and another on Friday, Shorten said smart politicians did not just lead, “they also have to listen”.