In the dark world of nuclear weapons and planning for nuclear war, the term “nuclear winter” refers to the period after an exchange of nuclear weapons. It denotes the idea that a world devastated by such weapons would descend into a period of years, perhaps decades, in which the sun would be partially blocked by dust and debris in the atmosphere, crop yields would plummet, and famine would stalk the earth. A population huddled amongst the ruins, dying of radiation poisoning and stripped of critical infrastructure would struggle to survive.
We may yet see some small version of that hell for American small businesses in the aftermath of our current misguided COVID-19 lockdown of the economy.
Progressive thinkers, steeped in the abstract fantasies of academia and divorced from reality, think of the economy as some sort of fixed state of being. Businesses exist. Money comes in. Taxes are paid. It’s simple.
In this fantasy world – where payroll never has to be met and profits magically always exceed costs – grand, strategic decisions by government officials can be made without fear of any lasting consequences. We can shut down the economy of the nation for a month, or two months or even a year, and, then, whenever our “experts” tell us it is safe to open up again, we can flip a switch, and everything will be exactly as it was before.
Except it won’t. It may seem that way to the man or woman drawing a government paycheck or working on a laptop from home, and feeling no pain, but out in the real world, businesses are dying every day, and far too many of them are never coming back to life.
Main Street America, an organization focused on support for America’s small businesses, recently published a study based on a survey of thousands of small business owners all across the nation. It found that 7.5 million businesses were in danger of going out of business if COVID-19 shutdown measures remained in place. Two-thirds of entrepreneurs said they may have to shut forever if business disruption continued at its current rate for up to five months. More than 30% said they were in danger of going under if measures stayed in place for two months.
The nation as a whole is now passing that sixty-day mark, which marks the point of no return for one out of every three businesses surveyed.
Well over half of the businesses surveyed saw a 75% drop in revenue as the result of Covid-19 lockdown measures. Eighty percent of the businesses surveyed were closed. Eighty-five percent of the businesses surveyed were being forced to layoff employees. Based on that figure 35.7 million Americans have already lost their jobs or are in danger of doing so.
A separate study by researchers at the University of Illinois, Harvard Business School, Harvard University, and the University of Chicago projects that 100,000 American businesses have already closed permanently. That means exactly what it sounds like it means. They will never reopen their doors.
Nationally, that figure means that we have already lost 2% of all small businesses in the country. And, the carnage is only getting started.
Data compiled by the National Federation of Independent Businesses is equally sobering. John Kabateck, the organization’s California director recently discussed the results of a survey of its members in that state. “Our members are saying there will be a point in the coming weeks when they’ll have to make a vital crossroads decision,” Kabateck said. “They’re soon going to find themselves at the edge of that cliff.” About half of the small-business owners in California said they couldn’t survive more than two months without the income from their normal operations. “I’m operating bare-bones,” Tanya McAnear said, the shop owner of Bad Madge, a small, boutique store in San Diego. “I laid off all my employees. I’m not paying myself a salary, so I’m living off my savings. The money I’m making from online sales is dramatically reduced from brick-and-mortar sales. I think I can stay afloat. But that’s for right now. I don’t know if that’s sustainable.”
Bernard Lebel, the 32-year-old owner of the California Sock Company in Pacific Beach, said recently he’s particularly worried about the shutdown’s long-term effect on local shops and restaurants in tourist areas. “Most business owners live off cash flow,” Lebel said. “So, they accumulate debt in the slow season, and they make all their money in the spring and summer.” Shutting down now, in the most critical season of the year, won’t just hurt for a few months. It will impact the entire year, and many businesses will not survive the pain. The damage will have been done.
In state capitals all over the country, governors and legislators who have never had to run a business or turn a profit are making decisions that will make or break businesses many Americans have spent their lives building. Far too many of those decisions are being made divorced completely from their long term consequences or the reality of private industry.
It may all seem very neat and abstract from the vantage point of a bureaucrat drawing a guaranteed paycheck. At street level, where small business owners struggle to make a profit, it looks a lot messier. And the future – an economic nuclear winter – may look even worse.