[Marxism] Fwd: Beware the zombies | Michael Roberts Blog

Louis Proyect lnp3 at panix.com
Tue Jan 24 06:12:54 MST 2017

This confirms what I argued in a recent debate on the role of 
profitability.  The huge profits gained since the end of the Great 
Recession have been mostly confined to the large companies: “just a few 
mega companies hold most of the cash while thousands of small and medium 
enterprises (SMEs) hold little cash and much more debt.  Indeed, a 
minority are really ‘zombie’ firms just raising enough profit to service 
their debt.”

It is easy to see why there are so many zombies.  Despite the relative 
recovery of headline profitability in many economies in the 
credit-fuelled boom from 2002 to 2006, many small to medium-sized 
companies did not see an improvement in profitability.  Instead they 
racked up higher debt through bank loans.  The Great Recession caused a 
collapse in profits and even after 2009, profitability improved little 
for these companies while debt remained high. But the zombie companies 
have struggled on because interest rates were so low and banks would not 
foreclose.  This scenario has been found in the extreme in Italy where 
‘non-performing’ bank loans have reached 20% of GDP.

full: https://thenextrecession.wordpress.com/2017/01/23/beware-the-zombies/

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