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Return of Zombies from Kate Burgess and Paul Krugman

January 3, 2014

FT: “Ranks of UK zombie companies shrink” by Kate Burgess reporting on R3 data:

The so-called zombie companies that can do little more than pay the interest on their loans have sunk to new lows… The rise of zombie companies, which would have failed in previous recessions, has been a mark of the recent downturn. These are the companies that have been kept going by ultra-low interest rates and the forbearance of creditors… While some insolvency practitioners say the survival of zombies has helped to protect jobs, it has also held back recovery by hampering the expansion of healthier companies.

Recall Burgess wrote about zombie companies last year (December 31, 2012: “Zombie firms choking off economic renewal” and February 2013: “Zombies disappearing as UK conditions ease“)

Also back with “zombie” for the new year is ZombieLaw favorite, Paul Krugman of NYTimes: “Bodyguard of Zombies, Counterattack by Cockroaches“, reviving his notion of zombie ideas and adding new metaphor of cockroach ideas:

Consider three arguments one might make against 21st-century populism:

2. OK, inequality is increasing, but it’s not a problem.

Argument 2 doesn’t stand up under scrutiny, but it just keeps being made anyway — it’s a zombie.

and

There are several arguments you could make for austerity in a depressed economy:
1. As a matter of principle, government borrowing must crowd out an equal amount of private spending.
2. OK, maybe that’s not true. But confidence!
3. OK, maybe no confidence fairy. But debt! 90 percent!

Argument 2 is a zombie, thoroughly refuted by evidence, but continually asserted all the same. And 3 is part-zombie, part highly dubious assertion. Again, however, none of these arguments is ever taken off the table.

Concluding:

I’d love to be having real debates on these issues. But we aren’t having and can’t have such debates, because the cockroaches and zombies get in the way.

Note connection of zombies to insects.

Krugman asserts that

the other side here isn’t engaged in good-faith argument, just looking for anything that comes to hand, with no regard for consistency.

Maybe that’s true… or maybe, as I’ve said before, Krugman is as much a zombie arguer as his strawman opposition. There is no debate here because Krugman says so. These claims are too generic for either side to be proven true. They are platitudes. These are beliefs not facts.

Consider also, that zombie companies are a kind of zombie idea. The idea that we can somehow tell which companies are only surviving because of low interest rates, presumes an ability to assess the market better than the market can. It’s a value judgment, again, a belief system, not a factual analysis.

The entrepeneurs of struggling business deserve more respect than to call them zombies, and so does Krugman’s opposition. The debates must occur even when you think your opponent isn’t arguing in good faith. The debates are still valuable, the ad hominem attacks are probably not. (…?)

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