Over at Project Syndicate, Raghuram Rajan--professor of Finance at the University of Chicago's Booth School of Business, and former chief economist at the IMF--draws some links between income inequality and the global economic crisis.  In particular, Rajan sites the expanding gap between those American workers in the 90th percentile for wages and those in the 50th percentile, and the political responses to that shift as creating credit bubbles.  

Perhaps the most important is that technological progress in the US requires the labor force to have ever greater skills. A high school diploma was sufficient for office workers 40 years ago, whereas an undergraduate degree is barely sufficient today. But the education system has been unable to provide enough of the labor force with the necessary education. The reasons range from indifferent nutrition, socialization, and early-childhood learning to dysfunctional primary and secondary schools that leave too many Americans unprepared for college.

The everyday consequence for the middle class is a stagnant paycheck and growing job insecurity. Politicians feel their constituents’ pain, but it is hard to improve the quality of education, for improvement requires real and effective policy change in an area where too many vested interests favor the status quo.

Moreover, any change will require years to take effect, and therefore will not address the electorate’s current anxiety. Thus, politicians have looked for other, quicker ways to mollify their constituents. We have long understood that it is not income that matters, but consumption. A smart or cynical politician would see that if somehow middle-class households’ consumption kept up, if they could afford a new car every few years and the occasional exotic holiday, perhaps they would pay less attention to their stagnant paychecks.

Read How Inequality Fueled the Crisis here.