COVID-19 uncertainty is bad for businesses and the economy

When the Coronavirus started, one of the first things that most governments did was close or severely restrict service-related businesses. In Minnesota, Governor Walz ordered the closure of dining places and bars to close on March 16th. This was then extended to a stay-at-home order for nonessential businesses that was set to expire in early April but was extended till May 4th.

Since then, Walz has amended the current stay-at-home order to allow for some businesses to return to work. Specifically, that includes those businesses which require the least contact with consumers. Moreover, this business can only be open as long as workplaces can maintain distancing as well as disinfecting procedures. For the rest of the population, Walz is expected to announce whether the shutdown will be extended after May 4th or not.

All of these changes and extensions are creating a lot of uncertainty for businesses. In order to plan and operate properly, businesses need a stable environment. For now, that includes knowing when they will be able to open, and for how long.

However, decisions regarding whether to open up the economy are being made on the go, with little consideration of how this affects the economy. Certainly, some of this uncertainty is to be expected considering how novel the pandemic is. But that does not mean that the costs of uncertainty will go away. In fact, these costs will only multiply the longer these conditions persist.

What’s worse is that, unlike certainty created in the market, which businesses can get around through things like insurance, there are no ways to get around these closures. Businesses have only been asked to close without considering any innovations they could that would enable them to stay in business while at the same time protecting their workers and businesses.

If this uncertainty persists, it will only increase the risk of investing in the economy, which will severely impact economic growth.