After a difficult first half of 2020 in which the US economy fell to record lows, the recovery has been faster than expected. The figures generate optimism despite the losses. Joe Biden wants to quickly approve 1.9 trillion dollars to reactivate the economy and reach out to small businesses, the most affected by the crisis.
The United States economy contracted by 37.7% in the second quarter of 2020, the worst decline since the Great Recession of the 1930s. The recovery was in the shape of a ‘V’, in the third quarter it grew by 21.5%. However, the economic shock derived from the pandemic has only been able to withstand large firms, more than 400,000 small and medium businesses went bankrupt.
“A crisis is by definition distributing social suffering and the social suffering in this crisis has been immense and has been very unevenly distributed,” Juan Carlos Echeverry, former Colombian Finance Minister, told France 24.
Months without being able to open businesses have forced small entrepreneurs to permanently close or sell to large chains, which in some cases take the opportunity to acquire the competition at auction prices, highlights James Kwak, Professor of Law at the University of Connecticut.
The technology gap, wider for small businesses
Large companies have more access to credit, diversity of business lines and adaptability to new technologies as well as the adaptive processes that both consumers and governments demand in times of Covid, adds Professor Kwak in a column published in Washington. Post.
Technological adaptation facilitates competition in the face of the pandemic and precisely the Adobe company reveals that consumers in the US have bought 50% more online since April and May 2020, when the pandemic began than in the same months of the year previous. But this technological adaptability is a big challenge for small firms that are struggling to survive and have to face technological giants such as Amazon, Uber or Walmart.
To this we must add that more than half of the 522,000 million emergency dollars that were directed to small businesses ended up in the hands of large companies, as revealed by the Washington Post.
“The reality is that there is no case for businesses to remain open. The only reason we are open is to protect our workers and generate some income,” Elias Hengst, owner of three restaurants in Washington, told France 24. .
Elias did receive help from the government, although he says that it is over and that another round of public loans is needed so that restaurants and coffee shops like his can last until spring without closing. Spring is key because the weather will once again allow tables to be taken out and meet the demand while respecting biosecurity measures.
According to the National Restaurant Association of the United States, about 110,000 establishments have closed in the North American country, which is equivalent to 17% of the restaurants in the nation. The closure of a good part of the sector has contributed to reaching the more than 10.7 million unemployed in the United States.
“Predictability is good for business”
In this regard, Joe Biden has an ambitious economic stimulus plan of 1.9 trillion dollars to reactivate the economy and face the pandemic. This includes direct payments of $ 1,400 a month to all Americans who earn less than $ 75,000 a year.
In addition, it includes a minimum wage of $ 15 an hour and more generous unemployment benefits, 400,000 million dollars to accelerate the deployment of vaccines and the reopening of schools and 350,000 million to cover the budget deficits of state and local governments.
Biden also prepares an energy and infrastructure plan called ‘Build Back Better Recovery Plan’ and aims to create more than 18.6 million jobs in his first four years in office. It also wants to achieve the transition to a green economy that does not emit greenhouse gases by 2050.
For Hengst of this new Administration four very boring years are expected, “but boredom, routine and letting people return to normal, is good for business, predictability is good for business,” says the businessman.