By Alexander Chambers
To slow the spread of the COVID-19 virus, leaders have issued stay-at-home orders to citizens around the world, resulting in a massive blow to the global economy. Small businesses, moreover, have been told to close their doors as many are labeled as “non-essentials”.
As small firms are the driving force of every community, the situation can be compared to cutting off oxygen to the brain.
Our Take: The American economy could be headed for another Great Depression.
Economist Stephen Moore reinforced and warned the US could be headed toward a Great Depression if the economy isn’t revived by next month.
“At some point soon, we’re going to have to make some real decisions about what kind of a calamity we are causing through the lock-down of our economy. I’m not saying we should be inattentive to the public health concern…But at some point, we have to worry about what we’re doing to our society, and what kind of economy we’re going to have after this is all over,” Moore told host John Catsimatidis on his AM-970 radio show that aired in April.
Moore also added the country’s unemployment rate could get worse, rising as high as 23 percent. Let’s put this in perspective: The unemployment rate hit 24.9 percent during the 1933 Great Depression. Nevertheless, there are stark differences between 1933 and 2020. Today we have a thriving digital economy that allows workers to complete projects from anywhere.
The way we socialize, and work is changing – and subsequently shaping a new future. Many reports claim COVID-19 is creating a New World Order that all global citizens will have to embrace. We’ll have no choice but to follow and adjust to this new way of life.
CP Grunani, CEO of Tech Mahindra wrote in the Economic Times: “During my last visit to the US, the numerous conversations I had, were centered around COVID-19. I must admit that there is a perceptible change in the way we socialize, work and commute. But the significant changes are already visible. The ‘workplace of the future’ is ever-evolving and gradually shifting to accommodate new ideas, technology, and working arrangements. In addition to encouraging our employees to work from home, we have also deferred all our internal events which required large gatherings and encouraged everyone to leverage technologies…”.
The way we conduct business will forever be changed and the new economy will be about virtual purchases and experiences. Digital e-commerce was killing storefronts before now. COVID-19 has made matters worse forcing many more to close as revenue dries up.
These developments will have huge implications for our economy. Massive layoffs and unemployment will trigger economic depression in all areas of the world, thereby disrupting international order. Consider the following examples:
· Newspapers and major press outlets are also taking a major hit as advertisers pull out of contracts, canceling their advertising campaigns.
· Restaurants have closed their doors and now offer limited access to sit-down dining.
· Major retail malls have shut down.
· Entertainment outlets like Disneyland and Las Vegas casinos have all shut down.
With only essential businesses now open, and a mass shortage of supplies predicted, consumers can expect to see price increases on everything.
The Small Business Administration (SBA) has indicated that about 30 million small businesses operate across the United States. These enterprises employ roughly 59 million Americans.
The Take-Home Message:
If CVOID-19 doesn’t show any signs of a slowdown, up to half of all small businesses could be gone by June. Chambers is a Certified Business Advisor, Entrepreneurial & Financial Consultant.