Zoo worker here-- there is a terrible misunderstanding of zoos. All of these terrible things zoos are accused of are not how zoos are actually run anymore, and they haven't been since the 60s. There are international and federal laws that zoos must adhere to. If a zoo joins the American Association of Zoos and Aquariums, there are even MORE regulations they must follow to make it the best zoo (for animals, the environment, and the people) possible.

Firstly, animals are never wild caught, only aquariums still do this. The only animals you will find at a zoo that were born in the wild are those that cannot survive in the wild anymore due to injuries, imprinting, etc. Breeding animals are part of an international database so that it can be monitored and more animals aren't born then there are adequate places for. If you go to an AZA accredited zoo, you will likely see signage pointing our animals that are "SSP". This means they are part of a species survival plan, where they are bred and their offspring raised as far from humans as possible and in the most natural environment possible. These animals are then released into the wild as designated habitats where they can breed with wild populations and bring the population up and increase genetic diversity.

The exhibits are much larger than anyone would believe, because the holding area is typically huge. There are hides, toys, all sorts of things in the exhibit that visitors do not notice. Enrichment is given to the animals everyday to prevent what you describe as "insanity" which really is "stereotypical behavior"-- acting out something an animal would normally do in the wild. A good example of this is how a dog may act like he's burying his food when he paws at the floor next to his food bowl. What this video is, is the sloth bear playing. There may even be food hidden in the branch. That's what they do, they like to mess around with things, and dig into trees and sticks to get grubs and such. The video's sped up a lot.

Finally, zoos do not exist solely for the amusement of people. The first zoos were collections for the study of nature. Then for awhile it was for amusement, but that stopped. A long time ago. Zoos have four goals: Conservation, Education, Research, and Recreation. The only reason recreation is even in there is because it's the only way to bring some people in. People don't want to be schooled on the weekend, so you must educate them through entertainment, or "Edutainment". By educating the public, the goal is to bring a greater awareness to the plight our habitats and animals are in, so that a greater conservation effort can be made. A number of animals would not exist anymore if it were not for zoos. The best recent example would be the chytrid fungus killing off amphibians between Wyoming and Costa Rica. Hundreds of species have been saved by zoos either directly or through their research and funding.

If you'd like to learn more there is an old thread discussing zoos and there are several posts by myself and a few other people describing the conservation efforts zoos have done/are doing. You can find it here.