Before the economy officially collapsed, it was easy enough to imagine that the world would resume without much of a hitch after the pandemic had dissipated: Restaurants and bars would open in time for the start of the summer, shoppers would wander into stores once more, movie theaters would start screening again. Now it’s clear that little in the post-pandemic economy will be the same as it was, except, perhaps, for the ultrarich, who tend to be exempt from most upheaval. (David Geffen will no doubt find some way to resume his usual land-based standard of living when he disembarks the $400 million superyacht where he’s quarantining; Martha Stewart’s life will probably be fine even after her staff, workers she’s come to call her “detainees,” are free to leave her compound once again.)
The rest of us will have to contend with a ruinous recession defined first and foremost by mass unemployment and the potential wide-scale disappearance of independent businesses. In a March opinion piece for The New York Times, a group of chefs and restaurant owners speculated that up to 75 percent of independent restaurants, which notoriously survive on very thin margins, could vanish for good after the economic blow of the coronavirus shutdown. Last Thursday, Gabrielle Hamilton, chef and owner of the East Village restaurant Prune, described the uncertainty of keeping a restaurant, even a once successful one, in business after the coronavirus, in an age of ever-rising costs. “I, like hundreds of other chefs across the city and thousands around the country, [am] now staring down the question of what our restaurants, our careers, our lives, might look like if we can even get them back,” she wrote. Brick-and-mortar retail, too, has suffered a serious blow, and online behemoths like Amazon now stand ready to capitalize on the collapse of small retailers and chains alike. (Amazon, in particular, appears to have been laying the groundwork for a takeover for some time by mining data on third-party sellers who used the site in order to gain a competitive edge.) Among those casualties, as my colleague Alex Shephard wrote last week, are the independent bookstores that briefly appeared to flourish after the last recession.
The economic devastation of the coronavirus could very well transform entire city neighborhoods—each one defined by its own eclectic mix of homes, shops, eateries, and more—into blocks of permanently shuttered storefronts or outposts for massive chains. But there’s nothing inevitable about what might be the coming monoculture—or as Derek Thompson recently wrote in The Atlantic, an era in which “big companies will get bigger, many mom-and-pop dreams will burst.” Instead, and as always, it is easy to track how the choices made by this administration are driving us toward that future while countries around the world adopt different models to create economic stability and protect the vibrancy of their communities.
The financial distress unleashed upon small businesses in particular has been exacerbated by the inadequate funding and management of the federal relief program theoretically designed to keep them afloat. The first iteration of the Small Business Administration’s Paycheck Protection Program, meant to provide loans to small businesses to keep workers on payroll during the shutdown, was immediately overwhelmed with applications and ran dry after two weeks. According to one estimate by the Center for Responsible Lending, up to 90 percent of small businesses owned by women and people of color were prevented from obtaining loans in the initial round of funding as a result of the program’s guidelines and the limited funding. Applicants with past or pending criminal convictions were also shut out of the relief program.
Yet in the brief window before the fund ran out of money, several large corporations used a loophole to claw off millions of dollars in forgivable loans from the program. Those included restaurant chains Potbelly and Ruth’s Chris Steak House, the luxury hotelier Ashford Hospitality, and the international modeling agency Wilhelmina. (A few chains that secured loans from the program, including Sweetgreen and Shake Shack, eventually returned them after public outcry.) It’s already easy to see the kind of retail uniformity that has gripped much of the country over the last decade, as Applebee’s and Starbucks come to stand in for—and actively market themselves as—neighborhood spots. But the structure of the current bailout could act as an accelerant on the trend.
The corporate loophole wasn’t the only one of the Paycheck Protection Program’s shortcomings. As the program burned through its funds, it also ended up facilitating a windfall for banks, which, according to NPR, took in nearly $10 billion in total fees through their administration of the loans. Several companies have filed a class-action lawsuit alleging that Chase prioritized larger loans in order to rake in more processing fees.
None of this bodes well for the future of independent retailers, restaurants, and other small businesses when the lockdown ends. Last Thursday, Congress passed another relief package intended to provide more small business support in the form of an additional $320 billion for the Paycheck Protection Program, along with funding for other loans and grants intended to tide over businesses. But the bill also failed both to close the original loophole that allowed publicly traded companies to use the program and to add meaningful new oversight measures. Some business owners, including Prune’s Hamilton, have also argued that the program’s loan forgiveness stipulations, which require recipients to rehire staff within eight weeks of receiving money, are meaningless without an official end date to the shutdown in sight.
In the United States, small businesses, at least in principle, enjoy rare bipartisan support: Republicans tout them as proof that anyone can bootstrap their way to becoming a small-scale capitalist, and Democrats often see them as ethical, kinder alternatives to massive corporations. Yet small and independent businesses, slim as their margins may be, have often engaged in questionable labor practices and evinced their own kind of narrow-mindedness. The same group of restaurateurs who wrote to The New York Times in March about the predicament of restaurants, for instance, also pleaded in their letter for Congress to pass a Republican stimulus bill that initially contained a massive, no-strings bailout for the airline industry and attempted to ax new funding for the Supplemental Nutrition Assistance Program. Some independent proprietors—including the owner of a Kentucky coffee shop who blamed her business’s closure on unemployment benefits more generous than the wages she paid her workers—have also protested shutdown measures meant to safeguard workers and the public.
But at this moment, the greatest disservice to workers—rather than the practices of individual establishments, many themselves on the brink of collapse—is perhaps the unwillingness of the government to mitigate the worst harms of the shutdown and the subsequent recession. The combination of a byzantine, overburdened unemployment benefits system and a health care system that forces people to rely on employers for insurance coverage or purchase costly private insurance on the exchange has left millions of laid-off employees in a bind.
Though a half-measure like the Paycheck Protection Program has proven insufficient to combat mass layoffs, it does hint at a more effective way of weathering the shutdown. The program is a wan approximation of a model used by several European countries, including Denmark, Germany, and Italy, in which governments have stepped in as a kind of employer of last resort by simply paying businesses to keep furloughed workers on their payrolls until operations can resume. In the United Kingdom, the government currently covers up to 80 percent of furloughed workers’ pay; Denmark covers up to 90 percent. And as NPR’s Jim Zaroll noted, workers aren’t the only ones who benefit from this setup. “The European systems are also less disruptive for businesses, who know that when the current crisis ends, they can simply call their employees back to work right away, picking up where they left off,” he wrote.
Earlier this month, legislators in both the House and Senate introduced separate bills to establish a similar system in the U.S. “The most important thing we can do for workers and our economy is keep as many people as possible connected to their jobs, paychecks, and health care,” Sara Nelson, international president of the Association of Flight Attendants-CWA, AFL-CIO, said in support of one of the bills. That sentiment is, in some ways, shared by legislators of all political persuasions. But, of course, in the absence of comprehensive measures to suspend the economy and protect workers’ paychecks, states have instead sought to keep workers connected to their jobs by prematurely ending lockdowns, against health officials’ advice. “It’s crazy to open these businesses,” Georgia resident Sheryl Means told The Washington Post in the wake of Governor Brian Kemp’s decision to end the state shutdown. “Which do you want us to do: Be safe or be sorry? Live or die?” The lack of support to keep these businesses intact during the crisis only further incentivizes the disastrous choice to reopen—a desperate attempt to stave off total collapse. But across the ocean, as other countries enact something closer to an economic pause, the choice between worker safety and business solvency isn’t such a dire trade-off.