Zombie Economics: How Dead Ideas Still Walk among Us

Zombie Economics: How Dead Ideas Still Walk among Us

Zombie Economics: How Dead Ideas Still Walk among Us

Zombie Economics: How Dead Ideas Still Walk among Us

Synopsis

In the graveyard of economic ideology, dead ideas still stalk the land.

The recent financial crisis laid bare many of the assumptions behind market liberalism--the theory that market-based solutions are always best, regardless of the problem. For decades, their advocates dominated mainstream economics, and their influence created a system where an unthinking faith in markets led many to view speculative investments as fundamentally safe. The crisis seemed to have killed off these ideas, but they still live on in the minds of many--members of the public, commentators, politicians, economists, and even those charged with cleaning up the mess. In Zombie Economics, John Quiggin explains how these dead ideas still walk among us--and why we must find a way to kill them once and for all if we are to avoid an even bigger financial crisis in the future.

Zombie Economics takes the reader through the origins, consequences, and implosion of a system of ideas whose time has come and gone. These beliefs--that deregulation had conquered the financial cycle, that markets were always the best judge of value, that policies designed to benefit the rich made everyone better off--brought us to the brink of disaster once before, and their persistent hold on many threatens to do so again. Because these ideas will never die unless there is an alternative, Zombie Economics also looks ahead at what could replace market liberalism, arguing that a simple return to traditional Keynesian economics and the politics of the welfare state will not be enough--either to kill dead ideas, or prevent future crises.

In a new chapter, Quiggin brings the book up to date with a discussion of the re-emergence of pre-Keynesian ideas about austerity and balanced budgets as a response to recession.

Excerpt

Zombie Rule #2, Double Tap: You think it’s dead (technically it was
before you shot it); one more makes 100 percent sure.
         –ZOMBIELAND(2009)

I began the task of revising Zombie Economics for a paperback edition in mid-2011. At the time, the global landscape reminded me of the closing scenes of one of those zombie movies that end badly. After a brief period when escape seemed possible, new hordes of zombies had emerged, overwhelming the remaining islands of sanity. The dead ideas that had caused the crisis had reemerged under the undead banner of “Austerity.”

But, as it turned out, the movie had a surprise twist to come. After years in which (at least in the United States) the only large-scale protest was that of the Tea Party, demonstrating in support of the zombie ideas of the financial sector, popular resistance suddenly sprang up. It began in Wisconsin with opposition to the public sector cuts proposed by newly elected Republican governor Scott Walker.

The Wisconsin protests were only partly successful, and despite continuing struggles in Ohio and elsewhere, it seemed as if the momentum might be lost. Then, apparently out of nowhere, came the Occupy Wall Street movement. Drawing their inspiration directly from the Arab Spring, and indirectly from Martin Luther King Jr. and the civil rights movement, a small band of protestors occupied a park in New York’s financial district.

The initial response from the established media and from the financial sector itself was a mixture of disregard and derision. The response was symbolized by a viral video of a group of investment bankers, gathered on a balcony to mock the protestors below while consuming a small part of their (doubtless well-earned) bonuses by sharing a bottle of champagne.

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