With his 1995 bestseller, The State We're In, Will Hutton tapped into the spirit of the times with a book that voiced brilliantly the concerns many people shared about the decline of public service, the increased uncertainty affecting many people's prospects, and the alienation of the financial system from the needs of businesses and households. It was an optimistic book, however, and for some time from 1997 the New Labour government looked as though it would tackle some of the structural problems of British society.

In this new book, Them and Us, the concerns and preoccupations are the same, but the tone is more pessimistic. These are darker times. Behind us, or perhaps still with us, the Great Financial Crisis, the worst recession since the 1920s, and the disheartening authoritarianism combined with incompetence of a supposedly progressive government. Ahead of us, the need to reduce an unsustainable national debt, the occasion for the new government to try to reshape the state, and no clarity about the sources of growth and optimism.

Meanwhile, the banks carry on as if nothing had happened. Latest reports suggest City bonuses will amount to £7 billion this season. Surely a 'bonus' is supposed to be a special top-up payment for outstanding individual performance? Or have I missed something?

Much of the book is concerned with understanding the nature of social fairness. What does the science of human nature – including the recent literature on behavioural economics –  tell us about it? And moral philosophy? Hutton is trying to argue those on the centre-left away from the assumption that progressive taxation and redistributive taxation are both necessary and sufficient for a fair society. This in fact conflicts with deeply rooted notions of fairness, he argues, which emphasize individual responsibility for self-improvement, and question the acceptance of notions of 'need' which are personal and change over time. “Many on the left refuse to accept the legitimacy of the debate about how fairness is to be cast and financed, preferring instead to think that egalitarianism and redistributive taxation are self-evident virtues,” he writes (p79).

Hutton instead is in the territory of proportionality and desert, rather than universal entitlement. He is sympathetic to Amartya Sen's emphasis on capabilities. “Circumstance and contingency are part of the human condition,” he writes.

With these philosophical footings, the book ranges widely over problematic areas of the modern British polity – banking, the media, democratic institutions. It's interesting that so many authors now (including me in my forthcoming The Economics of Enough: how to run the economy as if the future matters, out in late January 2011) are focused on the institutions and processes through which we organize ourselves collectively. On the media, Hutton writes: “Liberalism surrounded by this capacity for hysteria is likely to be hard to sustain.” (p11). He argues that the corporately-owned media and PR industry are degrading the public realm, and adds: “the importance of the BBC as a countervailing force – with its guaranteed income courtesy of the licence fee, commitment to impartiality, huge investment in news-gathering and sheer scale – can hardly be overstated.” Although he takes the BBC to task for being affected by the surrounding hysteria, its central and strategic commitment (pdf file) to impartial and accurate news is clear.

On the banks, I wholeheartedly agree with much of Hutton's condemnation of the industry's structure and practices except for one thing. He blames competition in banking for the problems. The evidence doesn't support this – as our CEPR report Bailing Out The Banks set out – and on the contrary I'd agree with Simon Johnson (in his 13 Bankers) that concentration in banking and the consequent political power is the source of the crisis. Banks are too big and collude in rigged market structures, not too small and competing madly with each other.

This is a quibble. The book's a terrific read. It will make your blood boil with anger and stir you to action – or at least, help offset some of the paralysed gloom likely to be our lot for the next period. As he concludes, we deserve better – so let's do something about it.