George Irvin's discussion of the impact on society of the new "super rich" could not be more timely. As the UK faces up to the likelihood of a credit crunch-driven recession, attention is increasingly turning to the City and the implications for ordinary citizens of the extraordinary fortunes that have been made there in recent years.
Irvin focuses his attention on the US and UK, providing some startling statistics on how the top earners have benefited from recent economic growth; leaving behind those in the middle and at the bottom, and even those who we might think of as comfortably wealthy. The role of share options and private equity deals is highlighted as enabling the super-rich to leave the rest of society behind.
He is enlightening on the forces behind the rise in inequality at the top end, charting the relationship between neoliberal policy agendas in the US and UK and the profit squeeze of the 1970s.
He argues that while the tension between capital and labour was dealt with through a corporatist approach in mainland Europe, in the UK and US the response was instead to create a substantially less progressive tax system, a smaller state and to weaken organised labour. In the author's own words, he is "unapologetically 'old' Labour", and he connects the rise of inequality with a wide variety of social ills such as job insecurity, crime, poor health and excessive consumerism.
In the final chapter, Irvin recommends educational reforms to "level the playing field" combined with a much more redistributive tax system to bring inequality in the US and UK back down to its level in the 1970s.
New Labour, since 1997, has worked hard to reduce poverty among families and pensioners but has shown no inclination to tackle inequalities at the top end of the distribution.
Policy has instead focused on "social mobility", which should allow everyone to have an opportunity to join the rich, but as Irvin points out it is difficult to see how equal opportunities are possible when those at the very top are so far away from the rest of us.
The growth in inequality has been tolerated in the UK because of the concern that strongly progressive taxation will dissuade the very rich from living and working in the City of London. There is a conviction that incentives are important to those at the top end and that wealth created in the financial sector will trickle down to those further down the income distribution.
Work by Thomas Piketty and Emmanuel Saez cited by Irvin supports his view that top earnings have pulled away in the US and UK, unlike elsewhere in the world.
Piketty and Saez offer two plausible explanations: one is close to Irvin's view, that gains to the richest are due to the ability of top executives to set their own pay and capture rents at the expense of other interests; alternatively, it could be that liberalisation in the United States and Britain has enabled the market for top earners to work more efficiently.
Irvin dismisses the existence of an equity-efficiency trade-off by drawing examples from countries, particularly those in Scandinavia, that have combined flat earnings distributions with economic growth and innovation.
However, the evidence that the US and UK could switch to this path fairly painlessly does not seem that compelling.
Nonetheless, Irvin's book provides much food for thought, bringing together a huge amount of evidence on the changing nature of income distribution and its impacts on society, much of which will be of interest to social scientists and general readers with a concern for social justice.
Super Rich: The Rise of Inequality in Britain and the United States
By George Irvin. Polity Press. 2pp, £55.00 and £16.99. ISBN 978074564464 and 44653. Published 23 June 2008