Beyond the Zombie Economy

Written by Johanna Montgomerie

Originally published on resilience.org

Economic metaphors are important to illustrate the distinct features of specific economic systems that exist at particular times. The Great Depression, for instance, uses a psychological framing of ‘depression’ to depict the dynamics of an economic system incapable of recovering from financial collapse. The present day metaphor is the ‘Zombie’ economy depicting the economic system as an unthinking monster in relentless pursuit of a single objective – here, short-term profits are synonymous with human brains. This builds on from the well-used ‘Zombie Banks’ metaphor made popular in the 2000s to describe the Japanese financial system, in which endless public subsidies to banks resulted in systemic erosion of economic vitality - the lesson was feeding the Zombie only breeds more.

There are, of course, other metaphors used to describe contemporary capitalism; like the ‘Vampire Squid’ used to illustrate the role of financial institutions in sucking the life out of the global economy. Sanguineous metaphors are very popular historically for depicting the role of finance within the economy as ‘bleeding it dry’; the Vampire, like the Zombie, is a monster with a singular rational objective ‘to feed’ and the humans are always its prey. Of course, Keynes preferred the ‘animal spirits’ metaphor to explain the same inhumane aspects of markets that must be controlled to sustain a market civilization.

Two books in particular articulate different aspects of the Zombie economy metaphor. The fist is John Quiggin’s Zombie Economics: how dead ideas still walk among us, which systematically unpicks how defunct economic theories are clung to by policy makers and politicians. Here, what is dead is the ideas and theories that created our current economic malaise; yet despite all the evidence to show these ideas don’t work, they do not die, they stay alive animated by the mystical power of the Central Bank. The second book by Kerry-Anne Mendoza, Austerity: the demolition of the welfare state and rise of the Zombie economy, uses the Zombie metaphor to explain how banks are feasting on interest payments from mounting debt stock and eventually consumers, tax-payers and the nation state will eventually exist solely to service these loans. What is dead is the securitization food chain, because it creates no value, and its dependence on a single-food source – our interest payments – means the Zombies must seek out new food sources in the welfare state using Private Finance Initiatives.

What we see in both Quiggin and Mendoza is the Zombie Economy as both dead idea and dead business model. Together they articulate the profound structural crisis that manifests as the Zombie Economy created by unfettered financialised expansion. Whether it’s the unfeeling monster in pursuit of its prey or homoeconomicus – the singular focus on short-term profit maximization means the Zombie apocalypse will not end with spontaneous growth or a moment of enlighted self-interest.

As Chuck Prince, then CEO of Citigroup, said in July 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” These words are the rallying cry of the Zombie army, as long as Central Banks keep interest rates low to negative and there is a blank cheque or a bazooka option (a public ‘unquantified’ risk guarantee) and governments remain committed to step-in and provide direct bailouts, asset buy-back schemes and support rounds of Quantitative Easing then all financial actors - from the ‘originate and distribute’ banks, to investment banks, to new financial actors like Private Equity funds - will keep on making short-term profits regardless of the wider structural crisis going in on the wider economy. 

The reality is the Zombie economy is firmly entrenched by the vested interests that benefit most from it, however it is still fighting for its survival. Nancy Fraser puts it plainly that contemporary global capitalism is facing a ‘triple crises’: “It is the convergence of these three strands – the ecological, the financial and the social – that constitutes the distinctive character, and special severity, of the present crisis.” Zombies in pursuit of short-term profit, whether it’s the algorithmic trader trying to make a profits in a millisecond or the CEO seeking to pump and dump his stock options to make a better bonus, cannot solve the very real problems our economy and society face. Nor do they want to!

Therefore, to move beyond the Zombie Economy we must begin with financialised growth, which like all growth models, has absolute limits. The first limit is ecological, the absolute carrying capacity of the earth cannot support ever-expanding growth. This stark reality is simply ignored by the Zombie hoards because it will not happen in the short-term, if it won’t affect quarterly earnings or yearly bonuses it does not register as relevant.

The second limit is financial, the business model of endlessly supplying cheap credit to generate more interest payments to securitize onto global markets and inflate asset prices did work for a decade or so, but now the problems of non-performing loans and hugely over-valued fictional assets are clear: the 2008 financial crisis was triggered by a tiny fraction of global lending – the US subprime market – which set off a maelstrom across global financial markets. A more heavily indebted global economy than 2008 makes finding outlets for more performing loans ever more difficult, this ensures that financialisation cannot keep going without more frequent financial crises followed by ever-larger bailouts.

The final limit is the social or how much the overall population is capable of reproducing the economic and cultural conditions that facilitate financialised economic activity. For example, are debtors (those providing the interest payments to Zombies) able to work and earn enough to service their debts? Are taxpayers willing to keep subsidizing an unreformed financial sector while accepting real-terms cuts to services and transfers from the government? Are people willing to go into ever more debt to get a University education and/or buy a home, or just to consume and live in an economy where average earnings are the same as two decades ago? What happens when the global consumers-of-last-resort in North America and Europe can no longer take on debt to buy every new product emitted from the global supply chain?

The answers to these questions could inform the political route out of this mess. Otherwise the Zombie Apocalypse will not just be a movie title it will be the economic metaphor of our time.

It’s not just that the evidence shows the Zombie economy does not work or that it is causing more problems than it solves; it is the unrecognised threat from how the ideas and metaphors that inform the Zombie Economy live on despite of their abject failures. Concepts like ‘trickle down economics’, ‘privatization’ and ‘efficient markets’ are all still prolific within elite policy and political circles – this is a very real problem. Without new ideas and concepts to move beyond the Zombie economy we are left only to fight the unfeeling, unthinking hoard only with more appeals to reason, logic and evidence. 

A new set of ideas and proposals are needed to address the triple crisis we face today; this requires a great deal more than simply reviving old models of industrialised expansion that solved the crises of yesteryear. Crafting an alternative set of ideas and politics begins by building a shared agenda to dismantle financialisation and build an inclusive economy capable of overcoming the ecological, economic and social threats created by the Zombie Economy.