A few days ago, I called attention to a book whose thesis is that at a particular level of wealth, the most important factor in a nation's well being is equality of income, see here. The lack of equality of income of in the United States is particularly problematic. Robert Reich argues in the July 19/26 double issue of The Nation argues that our income inequality caused the recession. He argues that when earnings accumulate at the top, wealth is invested where other big investors are likely to put their assets. This causes speculative bubbles. Meanwhile, when wealth is concentrated at the top, the rest do not have enough purchasing power to support the economy. This helped us get into the recession and makes it more difficult to get out.
Reich predicts that the pendulum will swing against the current inequality, but he is not sure whether it will swing "with reforms that widen the circle of prosperity or with demagoguery that turns America away from the rest of the world, shrinks the economy and sets American against one another."Reich outlines a series of progressive reforms. But those reforms would require the support of an enlightened business community to get through Congress.
Although Reich purports to believe that such enlightenment will show up at some point, it seems more likely that change will only come when things get ugly -- when an economic populism of "mad-as-hell" Americans turn against the establishment.