Bailout Capitalism
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Bailout capitalism is a form of capitalism in which the economy is so far out of equilibrium that the only way to stabilize the system is through government support to businesses and households.
Definition
Bailout capitalism occurs when the economy is so far out of equilibrium that the only way to stabilize the system is through government support to businesses and households.[1] By keeping the economy afloat through such artificial means the Schumpeterian creative destruction is circumvented and inefficient firms taking excessive risks remain in operation, thereby denying one of the main elements of normal capitalist development.[2]
Examples
The support can come in form of purchase of toxic assets as in 2008[3] and through money creation as in the quantitative easing program of the Federal Reserve and other central banks.[4] This program increased the assets held by the Federal reserve from $0.8 trillion in September 2008 to $9 trillion by May 2022 or by a factor of eleven.[5] The bailouts were repeated in 2020 with the difference that this time smaller business and households also received financial support.[6]
References
- ^ "'Bailout' Capitalism: Two Years On". Center for Economic and Policy Research. 2010-11-25. Retrieved 2022-05-17.
- ^ "Neoliberalism's Bailout Problem". Boston Review. Retrieved 2022-05-17.
- ^ Emergency Economic Stabilization Act of 2008, 2022-05-05, retrieved 2022-05-17
- ^ Weinstein, Kim. "PERI - Neoliberalism's Bailout Problem". peri.umass.edu. Retrieved 2022-05-17.
- ^ Board of Governors of the Federal Reserve System (US) (2002-12-18). "Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level". FRED, Federal Reserve Bank of St. Louis. Retrieved 2022-05-17.
- ^ Komlos, John (2021). "The American Gordian Knot" (PDF). Real-world economics review. pp. 103–108. Retrieved 29 May 2022.