Zombies now account for 12 percent of the companies listed on stock exchanges in advanced economies and 16 percent in the United States, up from 2 percent in the 1980s. Companies are surviving in the “zombie state” for longer, depleting the productivity of healthy companies by competing with them for capital, materials and labor.
These, then, are the trademarks of the fat and slow world: larger corporations, declining competition and fewer start-ups, which together undermine and slow economies already hindered by falling growth in the working-age population.
The bright side of endless stimulus, if there is one, is that recessions have become increasingly rare. Only 7 percent of the nearly 200 countries tracked by the International Monetary Fund suffered negative growth last year; that is about half the average share since records began. The I.M.F. projects that share will fall to 3 percent in 2020, close to a record low.
A global economy ruled by big, indebted companies looks sluggish but, in the view of many commentators, also very stable. Even as trade wars undermine economic growth, most investors assume central banks will ride to the rescue before it deteriorates into outright recession.
The problem, however, is that government stimulus programs were conceived as a way to revive economies in recession, not to keep growth alive indefinitely. A world without recessions may sound like progress, but recessions can be like forest fires, purging the economy of dead brush so that new shoots can grow. Lately, the cycle of regeneration has been suspended, as governments douse the first flicker of a coming recession with buckets of easy money and new spending. Now experiments in permanent stimulus are sapping the process of creative destruction at the heart of any capitalist system and breeding oversize zombies faster than start-ups.
To assume that central banks can hold the next recession at bay indefinitely represents a dangerous complacency. Corporate debt levels continue to rise; government debts and deficits continue to rise. If there is a sudden break in confidence, the damage will be that much greater and governments may find themselves too broke to stem it.
Until then, we are in a fat and slow world.
Ruchir Sharma, author of “The Rise and Fall of Nations: Forces of Change in the Post-Crisis World,” is the chief global strategist at Morgan Stanley Investment Management and a contributing opinion writer.
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