In March, the government began forcing businesses to close in an effort to stop the spread of the coronavirus. Not surprisingly, unemployment has soared, and many businesses are threatened with extinction. Equally unsurprising is government’s response–throw money at the victims it created. Government will soon be sending individuals money and providing loans and other financial support for businesses.
The government’s response is not surprising because government typically only does two things: force people to act as it desires or throw money at a problem. In this case, it is doing both.
It began by forcing businesses to close. When a business cannot operate, it doesn’t generate revenue. And when it can’t generate revenue, it must reduce its expenses. Since labor is the largest expense for most businesses, that means laying people off.
No business operates in a vacuum. Every business has vendors and suppliers who provide the products and services that the business needs. When a restaurant or gym is forced to close, that impacts many other businesses. And those businesses also have a supply chain that is impacted. The victims cascade.
The economy is a complex interaction of hundreds of millions of people (billions if we include the global economy). There are billions of transactions everyday, and each is based on individuals believing that the transaction will improve their lives in one way or another.
Unlike many of our electronic devices, the economy doesn’t come with a “pause” button. We can’t temporarily stop it and expect it to resume where we left off.
When the government finally allows us to return to work, tens of millions won’t have any work to return to. They, and the businesses that employed them, will be the visible victims. But their loss of income and the closure of the businesses that employed them will impact countless other businesses and those that they employ.
The deaths from COVID-19 and the soaring numbers of unemployed are the visible victims of the pandemic and the government’s response. But the number of victims will cascade. Sadly, many will never be identified as victims of the pandemic.