A zombie idea, per Quiggin, is one that keeps coming back, despite having already been killed. That seems like an apt description of where we're headed now - eg. resuscitating free market ideology after the 'Great Recession' caused by - free markets. The truly paranoid can be extra worried recalling Milton Friedman's statement that "our (true free-market enthusiasts) basic function is to develop alternatives to existing policies, and to keep them alive and available until the politically impossible becomes politically inevitable." Worst of all, some hold a suspicion that conservatives are committed to bringing about such crises if they don't naturally occur. Zombie economic ideas highlighted in the book include privatization, the 'Efficient Market Hypothesis,' the 'Laffer Curve,' and 'Trickle-Down Economics.'
I was particularly intrigued by the author's pointing out that restrictions on the dismissal of workers or requirements for sizable separation packages are the most vilified supposed obstacle to improved economic performance, yet those protesting the loudest ignore the one-sided bonuses, options, and pay without performance packages for the leaders who usually cause the worker layoffs. In case that isn't rich enough, there's also option repricing and backdating, golden parachutes, and gross overpayment vs. foreign firms, while offshoring millions of American jobs to save money. (In 2008, the world's largest bank - ICBC, market capitalization of $250 billion, paid its CEO $235,000, vs. J.P. Morgan with a capitalization of $158 billion, paying $19,651 million to its CEO. In 2009, all Toyota executives together received less than Ford's CEO.)
The 'Efficient Markets Hypothesis' implies that private enterprise will always outperform government. Contrary evidence includes the LTCM bailout, the dot-com collapse, and now the Great Recession.'
Neither the 'Trickle-Down' theory now the Laffer Curve offer limits on how far to take the theory. Thus, per the enthusiasts, we can never treat the rich too generously with tax avoidance (or most anyone else, for that matter), nor ever run out of increased tax revenues from lowering taxes. Both are obviously silly positions. Meanwhile, despite the benefits of trickle down, inequality in America has considerably increased in the last four decades - directly undermining the theory. Contending, eg. that supporting evidence is supplied by the poor in the 1990s being more likely than the average household in the 1970s to have a wash machine, dryer, dishwasher, refrigerator, color TV, PC, and/or phone ignores major price cuts for those products and ignores major increases for others - eg. university education and housing. It also ignores the role of increased debt. International data show the U.S. has the lowest social mobility on nearly all measures, while the often despised European social democracies the highest.
Quiggin is far from convinced of the innate benefits of privatization, conceding it works poorly in some instances (small and medium-sized businesses), and often much better for large enterprises - especially in transportation or public utilities. He identifies instances where privatized enterprises have been re-nationalized after economic failure or poor service provision (eg. railways, airlines, hospitals), but also too easily slides over problems with public employees (especially teachers, public-safety staff) leveraging excessive wage and benefit payments. Russia has suffered a major privatization failure, with extensive looting of public assets via those linked to the government. The same occurred in China, to a much more limited extent, and there are numerous complaints in South America about water, etc. privatization. Chile privatized Social Security, leading to much higher administrative charges and unsatisfactory benefit levels, despite government spending on pensions remaining at over over 25% of the total budget.
Quiggin points out that public entities have a financing advantage - funders look for much higher rates of return from private entities than they expect from public bonds. China may offer lessons in this area - it has kept large sectors of its economy in government hands or control, and manages to still be quite competitive.