The Small Business Nightmare

A tidal wave of small business bankruptcies

The Covid-19 pandemic has turned the world upside in a matter of weeks. Over a third of the world population is under lockdown, economies are in freefall and the disease continues to spread. The size and scale of this disruption is unlike anything we have seen in decades, and the depth, severity and speed of this recession is perhaps unlike any other recession we have previously experienced.

In just over one month 30 million Americans have filed unemployment claims, an astonishing figure. In comparison, 8.7 million Americans lost their jobs during the entire Great Recession 0f 2007–2009. The current lockdown and the economic crisis it is creating are likely to be especially painful for small businesses in America.

Demand-Side Shock!

The line that has been continuously repeated by pundits, politicians and news anchors alike is that this crisis is a “demand-side shock” to the economy. Demand and supply are the foundations of economic understanding. A “demand-side shock” is a sharp increase or decrease in overall demand in the economy, demand for things like restaurant meals, airline trips as well as things like raw materials.

The pundits are right — this is a significant negative demand-side shock to the global…