America\'s Failed Economy Analysis

Aggregate demand is something that is a topic of interest. The Obama Administration bailed out banks in the United States and Wolff mentions Great Britain in a sense bailed out their banks by continuously printing and borrowing money. Banks are the reason for shift in aggregate supply and thus aggregate demand. The United States government as Wolff remarks, gives limitless credit and almost zero interest on banks, supplying them with an endless source of money to do as they will. They took risks because of this endless source and it led to the aforementioned bailout.
From this risk emerged ‘credit default swamps’ that served as insurance for loans but were not regulated as insurance. The biggest one, AIG, had banks come to them to ask for reimbursement for defaulted loans. Companies like AIG could not pay and thus the banking crisis occurred. Although banks like Goldman Sachs emerged unscathed, from these negative actions came a problem that continues today, unemployment.
Unemployment is something economists thought capitalism would prevent at least regarding reaching high levels. However, that has not been the case. Even with government intervention, capitalism has led to an increase in unemployment and even though the article discussing unemployment is nine years old, unemployment is still a major issue in the United States, especially regarding obtaining full-time employment.
Now that the undiagnosed bubble has burst, the true riskiness of supposedly safe assets has been revealed and the financial system has demonstrated its fragility. U.S. households have seen $13 trillion in wealth evaporate. More than six million jobs have been lost, and the unemployment rate appears headed for its highest level since 1940 (Krugman, 2009).
Such efforts to inject money into the economy through ‘regulation’ and so forth have only resulted in companies making huge profits and not spending those profits on increasing wages or sufficient job creation. People think perhaps regulation could solve this key issue…wrong!
When it came to regulation, Capitalism was regulated after the Depression according to Wolff from the 1930’s to the 1970’s. During this period companies, board of directors were all regulated, and it allowed for economic growth in a capitalist society. Wolff stated that some considered that period, ‘the good times’. Then when Reagan came into office and deregulated everything, that was when things became chaotic. However, Wolff points out, the second regulations kicked in, corporations tried to find ways to circumvent them, weaken them, and ultimately, eliminate them.
Wolff states the board of directors are the sworn enemies of regulations and that to introduce regulations without ridding corporations of the board of directors is to invite the cycle of regulation and deregulation all over again. That is why the government’s role in the economy can be troubling as half-hearted attempts at controlling the very actions that lead to recessions ultimately leads to continued economic instability. The government must tackle the structure of enterprise to not only improve wages, but also decrease the abilities, profits, and power of corporations especially their board of directors.
My question: Why would the United States government allow companies to place themselves in the government and promote policies and regulations that benefit corporations knowing the negative effects capitalism and corrupt banking practices have? The answer to this question would be simple. Money is power. With all these corporations making huge profits, they had money to spend on campaigns, financing politicians and thus gaining political power. Eventually they gained so much political power through funding campaigns and politicians, that they were able to acquire political positions of their own.
References
Krugman, P. (2009, September 2). How Did Economists Get It So Wrong? Retrieved from https://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?mtrref=www.google.com