The Great Recession

In Ages of American Capitalism, Jonathan Levy explains how the Great Recession of 2007 challenged many long-standing beliefs about capitalism in the U.S., especially the idea that free markets are the best and fairest way to run the economy. Before the crash, many people believed that the government should stay out of the economy as much as possible. They thought less regulation would lead to more growth and that markets could fix themselves. But the financial crisis proved that this wasn’t always true. Banks and financial institutions had taken big risks, and when those risks failed, the whole system nearly collapsed. The Obama administration’s response did not fully reject the old conservative ideas, but it did show a shift. President Obama supported large government spending to help restart the economy, like through the stimulus package. He also supported bailouts for big banks and auto companies, which was a big change from just letting companies fail. However, the government didn’t fully change the system or punish many people responsible for the crisis, so in that way, it was still partly a continuation of the older beliefs.

Levy explains in the chapter “The Great Recession” how much power the U.S. Treasury and the Federal Reserve had during the crisis. These two institutions, even though they are not run by elected officials, made many of the most important decisions during the recession. The Fed, led by Ben Bernanke, stepped in to support the financial system by lowering interest rates and buying large amounts of assets. The Treasury helped organize bailouts and rescue plans. Levy points out that because of how the U.S. economic system is built, these people often end up with the most power during times of crisis. Congress is often too slow or divided to respond quickly, but the Fed and the Treasury can act fast. This is partly by design. The U.S. has long trusted financial experts to guide the economy, and the system gives them tools to make decisions without needing political approval every time. But this also means that regular people have less say in major economic decisions, which can cause frustration and distrust, especially when the decisions seem to help big companies more than everyday workers.

In my opinion, the Obama administration did a mix of both continuing and changing the older economic ideas. On one hand, the government spent a lot of money and tried to help people through programs and aid, which showed a more active role in the economy. On the other hand, the system that caused the crash wasn’t changed much, and the big banks that caused a lot of the problems were saved without much punishment. That makes it feel like some of the old beliefs about markets and letting the experts handle things were still in place. I also think it’s a problem that the Treasury and the Fed have so much power when they aren’t elected. It might make sense in an emergency, but it can make people feel like they don’t have control over what happens to their money and jobs. Levy’s book helps show how American capitalism has changed over time, but also how some parts stay the same, especially who gets to make the biggest decisions.