Zombie companies. This is how, in a paper published in December 2017, the OECD dubbed companies that survive despite everything, those which should have gone bankrupt or undergone a thorough ownership restructuring, while instead they calmly continue to operate as if nothing had happened, despite productivity, investments and margins at a minimum. They are not just an economic curiosity: according to the Organization for Economic Cooperation and Development, in fact, the growth of the zombie companies is one of the main causes of the collapse in productivity in Europe over the last twenty years: their hunger for the capital necessary for survival, has drained funds that should have gone to new entrepreneurial concerns or to the more dynamic companies, or even only to social shock absorbers to allow those undertakings to die in peace without any particular concerns.
In Italy zombie companies are 4% of the total, they employ 5% of employees overall but drain almost 20% of the capital.
If hearing about zombie companies brings to mind a famous national airline or an equally famous bank in central Italy you are on the wrong road, but you probably have a wrong perception of the problem. In fact, Italy ranks as the second European country for capital held by zombie companies, preceded by Greece and followed by Spain. In Italy zombie companies are 4% of the total, they employ 5% of employees overall but drain almost 20% of the capital. Not only that, we are also the country that from 2007 to 2013 has seen more capital allocated to these companies. In a phase of slumps in investment and a credit crunch practically setting a record
Killing off zombie companies could be the key to increasing productivity and competitiveness of the production systems.
The extent to which all this has been detrimental to an Italian recovery is confirmed by two additional indicators: bringing back zombie companies to a physiological level equal to France and Germany would lead to a growth in investments in non-zombie companies of 2.5 percentage points and an increase in total productivity of 1.2 points.
In the words of the Economist, in an article published in times not suspects - a few months before the survey of the OECD -killing the zombie companies could be the key to stimulating growth, finally, in productivity and increase in the competitiveness of the production systems, especially the Italian one.
Paradoxical as it may seem, therefore rather than incentives to hiring and continuous company rescue plans, a plan well designed to break down the barriers of the bankruptcy would be needed, allowing failing companies to go their own way so that capital and labour force can be reallocated and a more efficient and competitive economic system can be built. Italy should therefore work on these aspects and manage to cope with the obstacles - such as resistance from the trade unions, institutions and others - that slow down or prevent the restructuring of businesses.