Phenomenon of zombie economy: evidence and political solutions

Abstract

Zombie economy is a result of financial crisis. In the process, main players are zombie companies, zombie banks and a government. The term was first used by Edward Kane, the Professor of Boston University, during the savings and loan crisis of 1980s in America. In 2008, he used the term to refer to companies that would have fallen in a deep financial situation unless the government supported them through guarantees and loans (Papworth T., 2013, p.11). Under conditions of stagnation, the economy is characterised by low production and trade for a relatively long period of time which, in turn, gives rise to unemployment, a reduction in wages and salaries and the overall decline of living standards. During these times, governments, as a rule, are called to assist the economy to overcome such harsh conditions through the provision of bailouts and other attempts that could support the banking sector (in order to avoid a banking crisis) and the entire economy. When a financial crisis comes to an end, the economy receives its own lifeless portion as a legacy of the difficulties and continues to try to preserve the old system of the government’s financial aid which was readily available to it during the crisis.