Zombie Economics

During his campaign for President in 1980, George Bush famously dubbed Ronald Reagan's platform "voodoo economics." He must have been on the right track for in its wake we now see the mythic creations of voodoo doctors walking among us- Zombies.

We have Zombie Banks, Zombie Corporations, a Zombie currency and, if I may go so far, Zombie Economics.

There is, of course, nothing new in this observation. Others have beaten me to the punch. Banks and other corporations which should be dead are still walking, ergo, they are Zombies- blindingly obvious. Yet, just as a miner skilled in deep extraction might buy a vein most think of as "played out" I'm going to deep mine this well used metaphor.

There are many aspects of Zombie lore, from the aforementioned voodoo doctors to the film genre inspired by George Romero's Night of the Living Dead. In Romero's Mythos, Zombies don't do the bidding of their voodoo masters. Instead, they shuffle around in search of the living- to eat. Further, the living bitten by a Zombie become Zombies themselves.

Combining the two mythic strands, Reagan's Voodoo Economics, which manifested in the mind of Dick Cheney as "deficits don't matter" created, by allowing debt levels to rise beyond that which which could easily be extinguished in a normal bankruptcy, the Zombie Banks and other corporations which don't serve their creators but instead feed, not on people, but capital, creating more Zombies in the process.

Unlike those in Romero's films, however, we are not trying to rid ourselves of these Zombies. We are incorporating them in our economic policies. Thus we have Zombie Economics.

In a recent round table discussion, George Soros opined: There are two features that I think deserve to be pointed out. One is that the financial system as we know it actually collapsed. After the bankruptcy of Lehman Brothers on September 15, the financial system really ceased to function. It had to be put on artificial life support.

The problem with the "artificial life support" of the financial system is that the voodoo doctors (government regulators) decided to play Frankenstein- a violation of the laws of capitalism as profound as re-animating dead flesh is to the laws of biology- instead of transplanting the dead banks' useful parts into living organisms.

In a sense, the problem begins at birth. To incorporate is to embody, or give substance to. Nature both incorporates the living and ensures that they die. Modern Man, however, at least the American variant thereof, seems loathe to allow its creations to follow suit.

The "creative destruction" aspect of Capitalism has been aptly described as an evolutionary process- the strong procreate and the weak are culled. Within a Capitalist framework, then, zombie corporations have as little place as zombie humans would in real life.

In Romero's films the living are eventually consumed by the zombies and if we are not careful the same could happen to us. Financially mediated trade has risen, flourished, and died many times in human history- e.g. Roman commerce gave way to Dark Age feudalism. I often wonder if the much more recent experience of Mao-ism (a taste, if you will, of feudalism) informs the Chinese perspective of the virtues of financially mediated trade. They seem amazed that we would flirt with such an outcome.

American leadership, reminiscent of Kubrick's Dr. Strangelove- perhaps Dr. StrangeCapitalist, or how I learned to stop worrying and love Zombies, would be more apt- now faces the daunting tasks of rewriting the rules of Capitalism and convincing our creditors that Zombies are normal. Most recently, Treasury Secretary Geithner visited China and assured them our Zombie currency (the US$) wouldn't consume the capital they create and store therein.

On the home front, Zombies are not just consuming capital, they are, in a sense, consuming Capitalism.

In an ironic twist worthy of Greek Tragedy, the supposed proponents of free markets who refuse to let bankrupt corporations die are engendering the very regulations they worked so hard to remove. They have forgotten one of the essential aspects of capitalism- free markets cut both ways. You are free to succeed AND free to fail.

Complaints over executive compensation, or even transportation weren't credible until those executives decided to turn their corporations into Zombies instead of letting them die. Bankruptcy and dismemberment are the check and balance of Capitalism. Without that check and balance we are left with Zombie Economics and, apparently ever-increasing regulations. The longer we allow Zombies to walk among us the more intrusive will state regulations become.

There is another, more mundane sense of the word Zombie which also seems to apply to the current situation- a person without an animating force, just going through habitual motions.

This last sense seems to aptly describe the US economy in in the 21st Century. While the Clinton years were not without problems, there was an animating force driving the economy beyond the desire to just "make money"- we were getting on the "information super-highway." Yes, it's a cliché, but it worked. Economic growth was, in a sense, a function of, inter alia, getting the country "wired." While the guys doing the "wiring" were getting rich in the process it, at least to me, seemed as if people were excited about more than just money- they had a dream of a wired world in their minds and they manifested it in the real world.

Could it be that Capitalism which aims solely to make money is indeed soul-less?

I believe so.

This isn't a knock on Capitalism, but rather a recognition that the system is a means to an end, not an end in itself. Policies that aim to re-invigorate growth by re-invigorating growth will likely fail. It seems to me that there needs to be a greater goal to engender durable economic growth, be it the desire to save ourselves from Nazi-ism, pave the country for our new cars or wire it up.

Let me try to explain this view from a different perspective. Finance, per se, creates nothing. Finance used in pursuit of a goal can be extremely helpful so long as the goal is not merely making money (at which point the financial system, as seems obvious, becomes parasitic). Finance, in a sense, is a Zombie requiring an animating force, be it the desire to "go green" (by retooling our transportation and energy production sectors), make America beautiful (by rebuilding infrastructure), or some other desire.

We need, it seems to me, a goal, a dream, or we're just going to keep shuffling around like a Zombie.