Such sweeping problems as soaring inflation, poor-quality jobs, or low growth may not seem related to the management style of The Office’s Michael Scott Paper Company or pyramid schemes like Elizabeth Holmes’s Theranos. Yet there may be more to this connection than meets the eye. The recovery after the COVID-19 crisis pointed to several weak points in the economy like supply-chain disruption, but there’s also another mounting problem: companies relying on new sources of money to cover up previous debt, thus disguising the fact that they aren’t making any profits. They’re called “zombie firms” — and they’re becoming increasingly important.

Zombies are firms with negative profitability or profits so low that they can’t even pay their debt interest. These companies’ share in advanced economies has grown tremendously in recent years, reaching as much as 20 percent of all firms in several countries. In a recent study, we showed that this dynamic has also happened among listed firms in the United States. Such a large number can’t just be a matter of scams. It includes such established firms as Boeing Co., Carnival Corp., Delta Air Lines, Inc., and Macy’s, Inc., which used to be highly profitable but have been struggling recently. There are also startups like Uber that can remain unprofitable for years because it is expected that at some point they will start making profits. But many never do, and their collapse can be spectacular (as in the case of WeWork).

The overwhelming majority of zombies in the United States register negative profitability even before making interest payments. This tells us that they have serious problems at the level of production, which only are only aggravated by having to cope with their financial commitments. The share of listed companies with negative profitability before meeting their financial commitments has grown significantly over the last half-century, rising from 3 percent in 1969 to 33 percent in 2001 and remaining high ever since.