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Zombie capitalism

from David Ruccio


Capitalism’s crises are clearly becoming deeper and more severe. After the crash of 2007-08, the United States (and much of the rest of the world) was subjected to the Second Great Depression, the worst economic downturn since the depression of the 1930s. Now, in the midst of the novel coronavirus pandemic, business activity has ground to a halt and unemployment has soared to levels reminiscent of the first Great Depression.

Not surprisingly, both Main Street and Wall Street firms have once again turned to the U.S. government to be bailed out through a series of programs that dwarf anything the world has seen before.

The Federal Reserve and the Treasury Department have stepped in with a broad array of actions to keep capitalist enterprises afloat, including up to $2.3 trillion in direct lending to support employers and financial markets (including loans to 24 large financial institutions known as primary dealers), lower interest-rates (along with a promise to keep them low for the foreseeable future), a resumption of the purchasing of massive amounts of securities, relaxing regulatory requirements on financial institutions, direct lending to banks (to encourage them to lend to their corporate clients), and the list goes on. They’ve also supported direct payments to workers, through so-called stimulus checks to households and extra payments to unemployed workers, so they’ll be available to employers when business activity resumes.

corporate debt

The result has been an explosion of the debt (securities plus loans) owed by nonfinancial corporations, which is now close to 80 percent of Gross Domestic Product. That debt (which has been subsidized and encouraged by the federal bailout) has become the mainstay of economic activity in the United States. It’s what’s keeping American businesses—including Apple, Walmart, AT&T, Disney, Nike, and Berkshire Hathaway—afloat.


And, as businesses take on increasing amounts of debt, the percentage of “zombie firms“—corporations whose debt servicing costs are higher than their profits but are kept alive by relentless borrowing—is now close to 20 percent.

This growth of zombie capitalism is not new. Capitalism’s most ruthless critic saw the trend emerging already in the middle of the nineteenth century:

The last illusion of the capitalist system, that capital is the fruit of one’s own labour and savings, is thereby destroyed. Not only does profit consist in the appropriation of other people’s labour, but the capital, with which this labour of others is set in motion and exploited, consists of other people’s property, which the money-capitalist places at the disposal of the industrial capitalists, and for which he in turn exploits the latter.

As it turns out, the Wall Street Journal is well aware that the combination of massive government bailouts and widespread corporate indebtedness has cast doubt on contemporary capitalism, since

easy money has juiced up the value of stocks, bonds and other financial assets, which benefits mainly the rich, inflaming social resentment over growing inequalities in income and wealth. It should not be surprising that millennials and Gen Z are growing disillusioned with this distorted form of capitalism and say that they prefer socialism. The irony is that the rising culture of government dependence is, in fact, a form of socialism—for the rich and powerful.

It should come as no surprise that the Journal sees this as a “distorted” form of capitalism, which has the effect of “creating more zombies and monopolies, widening inequality, undermining productivity and slowing growth”—thereby undermining the premise and promise of “just deserts” and an expanding economic pie. To which their only response is, if only U.S. capitalism could return to the natural law of “economic risk and loss”. . .

But zombie capitalism is real capitalism. Corporations and banks, supported by their political and media representatives, presume that in both good times and bad they are entitled to turn to assistance from a shifting combination of public and private entities, which will allow them to continue and expand their operations, even as the legitimacy of their enterprise as a whole is called into question. They’re only worried about their own profits (or at least their own less-then-profitable survival), confident that the risks and losses will be successfully passed on to others.

A time when capitalism did not involve the shifting of costs from capital onto others is a pure illusion, a fairytale that is trotted out when corporations and banks appear to violate the natural laws of economics and to increasingly call for and rely on cheap money and government bailouts.

The problem is, capital is the one that has kept the zombie story alive, since it has long treated its workers as will-less and speechless bodies, interested only in shirking effort and relying on handouts. That’s why now employers want to cut back on unemployment efforts, to force them back to work.

But capital itself has become the real zombie, a set of corpses that are only reanimated by the supernatural efforts of governments and banks. So, as befitting the genre (according to Simon Pegg), they have become increasingly “slow and steady in their approach, weak, clumsy, often absurd” in their activities.

The Journal clearly wants to eliminate the association of contemporary capitalism with death, preferring a world populated by entities that obey the laws of economic risk and loss. But, as we all know, that world is animated by another undead creature, the vampire, which “lives only by sucking living labor, and lives the more, the more labor it sucks.”

Contemporary zombies or a return to vampires—that’s the only choice offered by those who defend capitalism in the midst of the current pandemic. Better, it seems to me, to protect our brains and life-blood from all the undead creatures that haunt the capitalist imaginary and devise a radically different way of organizing economic and social life.

  1. July 30, 2020 at 12:58 pm

    This is wonderful economics using plain english. Thank you.

  2. Robert Locke
    July 30, 2020 at 7:30 pm

    ruccio. us capitalism is an anomaly. stop treating it otherwise, if not in america capitalism is perfectly accepted in regimes where social insurance thrives.

  3. Ikonoclast
    July 30, 2020 at 9:56 pm

    David Ruccio is correct on every point. US capitalism is not an aberration. It is the highest (i.e. worst) form of capitalism, so far, and the current end towards which all capitalism tends. Europe itself is tending to that form. I’ve noted before that the acolytes of German ordoliberalism and the northern chauvinists of the EU imagine themselves above the US tendencies by virtue of a bit of middle class socialism, the token representation of unions in industry and the coddling of their own aristocracy of labor against the claims of “lazy” Mediterranean labor.

    The EU is a an anti-democratic, neoliberal union run by and for Germany (and the other “northerns” to a lesser extent) on the essential lines of Friedmanite monetarism and austerity with a bit of ordoliberal window dressing. Germany’s treatment of immigrant labor and the attacks of the Hartz “Reforms” on oppressed labor are a case in point.

    Capitalist apologists just don’t get that Western capitalism is environmentally and socially unsustainable and that this economic model is collapsing under their very noses. I wonder how far the collapse has to go before they realize their precious capitalism is a doomed system? Those who don’t understand what capitalism is are the ones who are ignorant of history and believe all the standard lies of capitalist historiography: as either beneficiaries of capitalism or as willing dupes and useful fools like the supporters of Trump.

    Indeed, one can see from certain histories that one of the natural tendencies of capitalism is to corporate sanctioned dictatorship. Invoking Godwin’s Law is a standard tactic by those who want to deny capitalism’s clear natural tendency to corporate sanctioned dictatorship. We already see Trump talking of not accepting election results or even postponing elections. We know where this playbook comes from.

    • Robert Locke
      July 31, 2020 at 8:00 am

      Fortunately, I live in Europe and have for decades. Leninist hated the Bernstein revisionists and so did the Frankfurt School, so what’s new in your argument pussycat. Socialism is the great failure of the 20th century, which you do not acknowledge, American style capitalism has failed, too, but Europeans are quite comfortable with a capitalism with entitlements. Don’t denigrate those who fought so hard to get them.

      • July 31, 2020 at 8:41 am

        Robert, the Germans (on the whole) may be “quite comfortable” (too comfortable?) with capitalism, but are you sure the Greeks are? (on the whole). Germany is not Europe.

      • Robert Locke
        July 31, 2020 at 9:48 am

        True, One of the latest polls ranking richst countries

        Topping our list as the wealthiest nation in the world is not all that surprising.

        Germany has long been one of the leading countries in GDP and leads the world in some of the most important parts of the SPI: secondary school enrollment, access to electricity, access to drinking water and nourishment.

        european countries dominate AMONG the 50 countlies on the list, north and south nations are included.

      • Ikonoclast
        July 31, 2020 at 11:51 am

        Pride goeth before a fall. America was once proud though it had little to actually be proud of. Britain was once proud though it too had little to actually be proud of. Both now are disintegrating messes; sadly for their people, led astray by the capitalist elites. I fear much of Europe is not far behind. I fear for the whole world. Unsustainable endless growth capitalism is collapsing.

      • July 31, 2020 at 1:25 pm

        Ike, I’m glad you’ve chipped in, because I’ve made a comment on the Zachary Carter thread directed primarily to you. Here I differ from you emotively by trying to stay hopeful about what is possible rather than giving way to fear of what seems probable.

        It is only possible to use solutions already invented, and doing our own banking with a “credit card” is just such a one, that needs us to change very little in what we do, day to day, but enables us to meet our own needs and frees us to do what others and our environment need doing for them. The proof of the pudding is not in the complex recipe but simply in the eating

      • July 31, 2020 at 1:37 pm

        Typo at Zachary Carter: “very difficult to ready” should read “read”! Here, when the pudding tastes awful the problem lies in the recipe.

  4. July 31, 2020 at 8:35 am

    In the eyes of myself as a Chinese economist, this is not the dusk of capitalism. Capitalism is always be there, resulting in successes or failures, fortunes or pains. While bringing pains to Western, it achieved great success in China, which the Chinese leaders attributed unilaterally to the socialistic system, or the government-dominating development pattern. However, a healthy society always need both market and government, not only any one of them. Just as governmental intervention is needed to maintain stable flows domestically, international market also needs governmental intervention, so as to avoid sharp disconnect of flows (e.g. dumping). The continuity of flows shall lie at the center of economic policy, which mainstream economics, lacking dynamics and bounded rationality, failed to recognize. The historical Western success has been attained without a proper support of theory, now, Algorithmically, Both Eastern and Western can theoretically fix their arrogance or pessimism, and repair the international order.

  5. Richard H Caldwell
    July 31, 2020 at 10:43 am

    I’d say “socialism for the rich”, while entirely accurate, is too mild a description for the current form of corporate-political gangsterism whitewashed as “capitalism” and “free markets” in the U.S. One dollar, one vote has gotten us into deep trouble here, with a system that will likely require and experience a collapse before any meaningful reform is even possible.

    • Ikonoclast
      July 31, 2020 at 11:03 pm

      I agree with you. You have summed it up well. But will reform occur in the US due to a collapse? That would require the US to collapse “gracefully”. My fear is that the US will collapse “disgracefully” into war; meaning class war, race war, civil war and international war. It is not in the psyche of the American elites to retrench graciously and relinquish number one status. Like Sampson, but with far less justification, they will pull the pillars down and destroy everyone.

      • Robert Locke
        July 31, 2020 at 11:11 pm

        what about adjustments made in the new deal. you alarmists.

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