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Uncertainty regarding the shutdown is what is more threatening to businesses and the economy

When the Coronavirus started the first thing that happened was the closure of service businesses. In Minnesota Governor Walz ordered the closure of dining places and bars to close on March 16th.  This extended to a stay at home order for non essential businesses that was set to expire early April, but was extended till May 4th.

Governor Tim Walz has amended the current stay at home order to allow for some businesses to return to work. Specifically those businesses requiring least contact with consumers, as long as workplaces can maintain distancing as well as disinfecting procedures. For the rest of the population, Governor Walz is expected to announce whether the shutdown will be extended after May 4th or not.

This is a lot of uncertainty for businesses to plan through effectively. Business owners do not know when they will be able to open. Decisions are being made on the go as information changes and states see change in corona virus cases. This is to be expected but that does not mean small businesses will not bear most of the consequences for this uncertainty.  The possibility of extended shutdown will have bigger impact on investment decisions than people can expect. As an Article on Mises Wire Illustrates:

Even beyond the short term, business owners have no way to plan. If a business owner is allowed to actually conduct business during the summertime this year, it may still be that politicians will later elect to shut businesses whenever it is decided the risk of spreading viruses demands another “shutdown.” We’re even told this could go on for years.

One would have to be impressively naive and deeply ignorant about how businesses work to think that commerce, investment, and entrepreneurship would just continue as usual under these conditions. In reality,  the threat of a government-mandated lockdown hanging over the heads of countless business owners and entrepreneurs will mean there will be far less willingness and ability to invest in businesses, offer products and services, or employ people.

Generally, businesses are better equipped to handle uncertainty in the market, through innovation, insurance, changing practices and many other ways. But government mandated uncertainty is hard to work around because it affects the institutional framework under which businesses much operate under. This ultimately makes building, innovating and investing much more riskier, and less predictable, and eventually slows growth.

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