Broadly defined, the government intervenes economically by regulating the economic interactions among and between enterprises and individuals. It does this by taxing their activities (earning income, owning wealth, spending money, and so on) and by making rules governing those activities. However, the real contents and effects of government regulations depend on the interests that govern their design and implementation.

The New Deal-era taxes on business and the rich and regulations of enterprise behavior proved vulnerable and unsustainable. The enemies of the New Deal had the incentives (profit maximization) and the resources (their returns on investments) to undo many of its reforms after World War II, with ever-greater effect in the period since the 1970s. They systematically evaded, then weakened, the taxes and regulations of the New Deal, and eventually, when politically possible, eliminated them altogether. Business profits funded the parties, politicians, public relations campaigns, and professional think tanks that together shaped the real social effects and historical decline of government economic regulation. Examples include the destruction of the Glass-Steagall Act, the current assault on Social Security, the shift in the federal tax burden from business to individuals and from upper- to middle-income individuals, and so on.

Unions, the left, and the progressive wing of the Democratic Party-even when in power-proved unable or unwilling to secure the federal government’s commitment to New Deal policies. Proposals for “new” New Deals therefore strike many today as fundamentally inadequate given that the system’s dominant institutions–Capitalist Corporations–retain the incentives and keep obtaining the resources to undo any such New Deals. To the dismay of Keynesians, their critique of mainstream economic policies and proposals of new New Deals draw little enthusiasm or support. Regulation, deregulation, and re-regulation strike ever more Americans as a delusional misunderstanding of where the basic problem lies.

The above excerpt comes from Richard Wolff’s book, Democracy at Work: A Cure for Capitalism.

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