{"id":196337,"date":"2022-07-19T19:12:24","date_gmt":"2022-07-19T13:42:24","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=196337"},"modified":"2022-07-19T19:12:24","modified_gmt":"2022-07-19T13:42:24","slug":"zombies-of-the-west","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/zombies-of-the-west\/","title":{"rendered":"Zombies of the West"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article \u201cZombies of the West\u201d<\/strong> published in The Times of India<\/strong>\u00a0on 19th<\/sup> July 2022.<\/p>\n

Syllabus<\/strong>: GS 3 Issues and Challenges in the growth and development of Indian Economy<\/p>\n

Relevance<\/strong>: Productivity; Zombie Economy<\/p>\n

News<\/strong>: In late 2020, due to pandemic, people adopted digital technology at an accelerating pace. It was widely seen as an important milestone in terms of productivity, as it led to a surge in productivity across the economy.<\/p>\n

Historical Trends of progress and innovation<\/strong><\/h5>\n

In the earlier era of capitalism, the innovations generated advances such as electricity and gas engines, which lifted productivity across industries.<\/p>\n

In the post-war period. The productivity increased. However, the post-war productivity<\/strong> boom ended in the 1970s.<\/p>\n

Since 1970s, the computer age began, which contributed to the revival of productivity. In the 1990s, there was a productivity revival in retail stores. It was driven by checkout scanners<\/strong> and other digital inventions <\/strong>used in retail stores.<\/p>\n

However, in terms of the overall trend, there has been a downward trend in productivity for more than 50 years.<\/p>\n

Regional Variation in productivity<\/strong><\/h5>\n

Advanced Countries: <\/strong>Productivity has declined mostly in all the advanced countries<\/strong> like the US Economy.<\/p>\n

Emerging Countries: <\/strong>In emerging countries, productivity rose steadily from below zero in the 1970s to a peak above 5% in the late 2000s. Since 2010, nearly all developed countries<\/strong> have seen productivity drop. But the productivity<\/strong> in emerging countries grew by 3% in the 2010s.<\/p>\n

What are the reasons for the downward trend in productivity in advanced economies?<\/strong><\/h5>\n

First Perspective: <\/strong>The innovations like internet search fail to register in productivity measurements. Further, there are distractions like digital games and social media.<\/p>\n

Second perspective \u2013 Big Government: <\/strong>The role of government has been expanding in advanced economies. The developed economies have increasingly socialized economic losses during the crisis period.<\/p>\n

(1) Since, the 1970s, major capitalist countries began running budget deficits<\/strong> during the crisis period. Both monetary and fiscal stimulus<\/strong> has increased. For example, the stimulus was more than 7% of GDP in 2001, 12% in 2008, and 45% in 2020 during the respective crisis.<\/p>\n

(2) The governments have allowed generous rescues <\/strong>to the companies. As a result, corporate defaults<\/strong> have fallen. For example, In Europe, the default rate fell from around 20% after the 2001 recession to 10% after 2008 and 5% in 2020.<\/p>\n

(3) due to the first two, there has been a decline in entrepreneurial dynamism<\/strong>. The number of listed US companies fell by half in recent decades and, new business creation plummeted.<\/p>\n

(5) More active government support has undermined creative destruction,<\/strong> which is the lifeblood of capitalism. Therefore, productivity growth fell, as bailouts and stimulus grew significantly.<\/p>\n

(6) The US and European countries are facing the problem of a zombie economy.<\/strong> These zombies\u2019 companies did not exist in 2000 but now account for 20% of listed companies<\/strong> in the US, and higher shares in Europe. These companies\u2019 prey upon easy money<\/strong>. These firms suck resources<\/strong> from more dynamic companies and contribute to lower productivity across industries.<\/p>\n

What are the explanations for the productivity paradox or high productivity in emerging economies?<\/strong><\/h5>\n

(1) Productivity does not require scepticism<\/strong> of new technology.<\/strong><\/p>\n

(2) The role of the state has broadly declined in emerging economies since the 1970s. For example,<\/strong> countries like China and later India pivoted to more market-oriented economic systems<\/strong>.<\/p>\n

What should be done?<\/strong><\/h5>\n

Now Inflation is back. It may possibly end the era of easy money, which may in turn remove some of the zombie companies. This will induce a new productivity wave.<\/p>\n

The governments need to think about their role in the economy and bring reforms like moving away from the culture of big government<\/strong>, a new governing culture of bailouts, market rescues, and constant stimulus.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on an article \u201cZombies of the West\u201d published in The Times of India\u00a0on 19th July 2022. Syllabus: GS 3 Issues and Challenges in the growth and development of Indian Economy Relevance: Productivity; Zombie Economy News: In late 2020, due to pandemic, people adopted digital technology at an accelerating pace. It… Continue reading Zombies of the West<\/span><\/a><\/p>\n","protected":false},"author":10308,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10496],"class_list":["post-196337","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-times-of-india","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/196337","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10308"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=196337"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/196337\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=196337"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=196337"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=196337"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}