The Undead Economy: Lessons from a Hypothetical Zombie Outbreak

Imagine this: a bad batch of beer turns into a full-blown zombie outbreak, plunging the UK into chaos. Beyond the gory drama, this scenario—modelled using the National Institute Global Econometric Model (NiGEM)—reveals profound economic insights. So, what happens when pint-sipping Brits face the undead? Let’s dive into the economics of this zombie apocalypse.

The Zombie Scenario

The story begins with an infected beer batch spreading a zombie virus through UK pubs. Within days, thousands are infected. The virus has devastating effects: turning victims into zombies with no recovery and drastically reducing life expectancy to one year. The government enforces a lockdown by the second quarter, pours funds into vaccine development, and boosts defense spending. Meanwhile, civil unrest erupts, deepening the crisis.

Though fantastical, this scenario mirrors real crises like pandemics, civil unrest, and geopolitical conflicts. It’s a test of economic resilience under extreme stress.

The Channels of Economic Impact

1. Supply Shocks:
   • Population Decline: With one in 10 dying and others zombified, the UK workforce shrinks dramatically. Productivity plummets as fewer people contribute to the economy.
   • Lockdown Effects: Economic output falls as businesses close and workers stay home. Scarcity of goods fuels inflation.
2. Demand Shocks:
   • Reduced Consumption: Fewer consumers mean lower demand for goods and services.
   • Investment Uncertainty: Businesses hesitate to invest, given the chaotic economic outlook.
3. Government Spending:
   • Defence & Security: Protecting citizens from zombies requires significant military and policing expenditures.
   • Vaccine Development: Massive public funds go into research, exacerbating fiscal pressures.
4. Global Trade:
   • Trade Disruptions: Countries halt imports from the UK to avoid contamination, and tourism vanishes.
   • Fiscal Spillovers: Other economies increase spending on border controls and health systems.

Economic Fallout: The Numbers

• GDP Collapse: Real GDP falls by 30% in the first two years, recovering slightly but remaining 15% below baseline after five years. This reflects permanent damage to productive capacity.
• Inflation Surge: Prices soar by 21% in year one due to supply shortages, then stabilize as demand wanes with fewer consumers.
• Unemployment Paradox: While zombie decimation tightens the labor market, lockdowns raise unemployment as businesses shut.
• Debt Spiral: Government debt balloons, reaching levels that will burden future generations for decades.

Lessons in Economic Vulnerability

This fictional scenario highlights real-world vulnerabilities:

• Overlapping Crises: Combining population shocks, civil unrest, and trade disruptions exposes systemic weaknesses.
• Policy Response: Timely interventions, like lockdowns and research funding, are critical to mitigating long-term damage.
• Global Interdependence: The UK’s isolation underscores the fragility of global trade and fiscal systems.

Policymakers can use such scenarios to stress-test economies, ensuring preparedness for climate disasters, pandemics, or geopolitical upheavals.

Glossary of Key Terms

1. Real GDP: The total value of goods and services produced in an economy, adjusted for inflation.
2. Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power.
3. Supply Shock: A sudden change in the availability of goods and services, impacting production and prices.
4. Demand Shock: A sudden change in consumer demand, influencing economic activity and prices.
5. Fiscal Policy: Government actions regarding taxation and spending to influence the economy.
6. Debt-to-GDP Ratio: A measure of a country's debt compared to its economic output, indicating fiscal health.
7. Labour Market: The supply and demand for labor, affecting employment and wage levels.
8. Productivity: The efficiency with which goods and services are produced, typically measured as output per worker.