The Curse of Zombie Inc

Companies that refuse to die are cropping up beyond Japan,where they're still a problem. 

"Politically it's impossible to take away support from the little guys"

- Jason Clenfield

Not one of the almost 4,000 publicly traded companies in Japan filed for bankruptcy protection in the fiscal year that ended in March. Shinzo Abe has touted the decline in business failures as proof the country’s economy is reviving. But where the prime minister sees signs of life, dubious critics see zombies—that is, failing companies that keep staggering along thanks to easy credit, even when they can’t keep up with interest payments. Zombies stand in the way of a process the Austrian economist Joseph Schumpeter described as “ creative destruction”— the messy churn by which capitalism reinvents itself, with the death of aging, unproductive companies making room for startups. “When no old companies go out of business, new ones can’t come in,” because markets get overcrowded, says Martin Schulz, an economist at the Tokyo-based Fujitsu Research Institute.

Japan’s bout of zombiism dates from the 1990s, but now the disease is appearing in other countries, according to a January study by the Paris based Organization for Economic Cooperation and Development (OECD). The authors blame zombies for sapping growth and productivity in the developed world. The undead are being “kept alive by the legacy of the financial crisis,” which includes a prolonged period of low interest rates, coddling from governments, and forbearance from lenders reluctant to drive companies out of business because of the damage the bankruptcies will do to their own balance sheets.