NEW HAVEN – Asia needs a new consumer. A post-crisis generation of “zombie consumers” in the United States is likely to hobble growth in global consumption for years to come. And that means that export-led developing Asia now has no choice but to turn inward and rely on its own 3.5 billion consumers.
Of course, this is not the first time that Asia has had to cope with the walking economic dead. Japan’s corporate zombies were at the epicenter of its first “lost decade” in the 1990’s. Sclerotic companies were put on life-support credit lines by their zaibatsu – like banking partners – delaying their inevitable failure and perpetuating inefficiencies and disincentives that resulted in a post-bubble collapse in Japanese productivity growth.
Similarly, the crisis of 2008-2009 led to zombie-creating bailouts in the West. From Wall Street to AIG to Detroit, the US was quick to rescue corporate giants that would have failed otherwise. Britain and Europe did the same, throwing lifelines to RBS, HBOS-Lloyds, Fortis, Hypo Real Estate, and others. In the West, the excuse was “too big to fail.” How different is that from Japan’s mindset nearly 20 years ago?
But the most prominent zombie may well be a broad cross-section of American consumers who are still suffering from the ravages of the Great Recession. Afflicted by historically high unemployment, massive under-employment, and relatively stagnant real wages, while burdened with underwater mortgages, excessive debt, and subpar saving, US consumers are stretched as never before.