The first time governments imposed business closures in the name of
fighting the spread of COVID-19, the job market imploded.
Forty million Americans lost their jobs,
and at least 20 million of those are still unemployed. Income in America fell
to such low levels that federal tax revenues fell by more than 50 percent year
over year in April and remained down more than 25 percent in May. These are
losses of historic proportions.
It remains to be seen if the
country even began anything that could realistically be called a “recovery” in
June. After all, new unemployment claims were still at over a million new
applicants according to the most recent data. That’s still off-the-charts bad.
Nonetheless, we continue to hear about how, any day now, we’ll see evidence of
a “V-shaped recovery” in which jobs and economic growth will come roaring back.
But now
we’re already seeing governments—by which I mean a small cadre of governors and
unelected bureaucrats who currently rule by decree—announcing another round of
business closures and ongoing government regulations that micromanage every
aspect of a business’s daily interactions with customers.
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This is likely to greatly slow any V-shapred recovery that might have
been forming, and it will give businesses reason to further put off plans for
implementing efforts at recovering from the economic crash experienced in April
and May.
This is due to businesses being physically barred from hiring in many
cases, but it’s also due to “regime uncertainty.”
Regime uncertainty is a wealth-killing, job-killing phenomenon in which
business and property owners cannot plan for the future because of capricious,
unpredictable, and incoherent government interventions.
This has happened a number of times in the past in the United States, an
in each case, it prolonged economic depressions.
As shown by economic historian Robert
Higgs, regime uncertainty was a
significant factor in the long duration of the Great Depression. It
again became a factor during the so-called Great Recession, when the US
government began implementing a veritable smorgasbord of new regulations and
bailouts.
During these periods, there
were few limits on government action and the legal environment was prone to be
substantially changed on short notice and in a succession of fits and starts.
Not surprisingly, under these
conditions, businesses became reluctant to engage in new plans for expansion,
employment, or investment.
Now, thanks to the coming
“second round” of state lockdowns, businesses are once again in a similar
position.
For example, yesterday Colorado governor
Jared Polis announced that the
governor’s office was once again shutting down bars and nightclubs, after only
a few weeks of being allowed to remain open. This comes after a tiny uptick in new cases in the state.
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What was the legal process for
dictating to these businesses that they must now remain closed? There was none.
For all we know, Polis just decided in the shower yesterday morning that it
“felt right” to close down bars again. There is no debate, no checks and
balances, no period for public comment. We live in a world where a politician
can simply decide to shut down businesses whenever the mood strikes him.
Polis certainly isn’t the
only politician of this type.
Governors in a number of
states have taken similar actions, from California to New York to Texas and
Florida. Bars, and other businesses, are again being closed by government
edict. Or as in New York, they are not being allowed to open at all.
Some observers might shrug and say “well,
it’s only bars and a small minority of businesses. It’s no big deal!” This
might be true to some extent were other businesses able to obtain any useful
information on the likelihood that they too will be shut down. After all, just
because it’s “only” bars being closed now doesn’t
mean it won’t be all restaurants, barbershops, and offices later.
And how might businesses get
this information for planning purposes? It’s not as if any objective standards
or guidance are offered by the secretive junta of bureaucrats that decides a
business’s fate.
A
business could ask, “At what number of new cases/hospitalizations will you
extend new business closures?” But the business is unlikely to receive any
answer, because it is clear that governments have established no objective
standards of any kind. These government planners apparently decide business
closures based on personal whims or on political pressure. What’s worse, these
changes can occur without any warning at all. Even after months of talk about
plans for dealing with COVID-19, governments have yet to announce or establish
any standard at all by which to judge whether business closures or lockdowns
are necessary. Exactly how many COVID-19 deaths or hospitalizations are
necessary to “trigger business closures”? Virtually no government is willing to
say. The only governor who appears to have even suggested an actual numerical
standard is Greg Abbott of Texas who claims:
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As I said from the start, if
the positivity rate rose above 10%, the State of Texas would take further
action to mitigate the spread of COVID-19.
But
even in this case, government action is vaguely defined only as “further
action.” That could mean virtually anything. So
business owners are left just guessing what governments might do next without
anything we might call “due process” or even a “legislative process.” It’s just
a matter of a single man or woman issuing diktats about whether or not a
business owner is allowed to use his or her property. Moreover, just because
it’s someone else’s business today, doesn’t mean it won’t be your business tomorrow.
That’s the nature of regime uncertainty. One round of regulations now doesn’t
mean there won’t be something quite different and far worse coming down the
line soon.
Under these conditions, there is little
reason to assume there will be a V-shaped recovery. After a period of only one
month of “reopening,” governments are already enacting new business shutdowns
and claiming the authority to engage in these shutdowns indefinitely. It’s as
if the system were designed to
maximize regime uncertainty and destroy employment and income. For business
owners, there’s no end in sight.
Ryan W. McMaken is the editor of Mises Daily and The Austrian.
Send him mail.
