Small Business Impact of the pandemic. The number of active small business operators in the United States unexpectedly plummeted by 3.3 thousand or 22 percent during the critical two-month period in spring and early summer 2021. The decline in overall active business operators was the largest since at least 1992, and overall losses have been felt throughout virtually all industries, affecting nearly every sector to varying degrees. As the current slowdown sets in, business news sources are anticipating a coming round of financial difficulty for many small businesses.
Home based business news sources are predicting that the current economic slowdown will extend well beyond the current onset and into the second half of this year. The recent decline in manufacturing and service sector jobs is set to continue into the second half of this year. Additionally, the recent slowdown in commercial real estate loans and construction spending is also extending downward. In short, economists expect the business cycle to enter a “stagflation” stage, with the effects less likely to be felt by entrepreneurs than previously thought.
Home based business news is predicting that the forthcoming economic system will not offer much comfort to the thousands of entrepreneurs currently working toward financial freedom through new business endeavors. While there may be short-term glimmers of hope, the recent economic system has resulted in a major loss in jobs, higher borrowing costs, lower revenues, and growing consumer anxiety. Moreover, as the business cycle begins to enter a lower gear, consumers may become even more resistant to spending. As a result, many small business operators are now facing tough challenges as they seek to stay afloat during a difficult business climate.
Is capitalism itself doomed? The answer depends upon one’s perspective. For those who believe that the capitalist system is inherently good for America, perhaps the current economic situation is simply the natural order of things. They maintain that businesses must compete to survive, that markets must be open to all participants, and that the distribution of wealth should follow the desires of society rather than private interests. Ultimately, the goal is to achieve a balance of both capital and income, with each individual able to maximize their individual profit while helping to support a broader prosperity for the economy as a whole.
Yet, from a more socialist perspective, the current economic situation calls into question the very basis of capitalism – free market capitalism. Without the regulations and rules that maintain a level playing field for businesses and protect them from predatory lending and Wall Street manipulation, the economy will fail to properly distribute resources to vital economic activity. Without meaningful competition, Wall Street can manipulate businesses to behave according to its own interests rather than the needs of the general public. In the end, without basic economic planning and regulation, the circular flow of capital and income will be impossible to engineer.
As such, some have suggested that instead of relying on large national banks to lend to small businesses money, it would be more efficient and profitable to rely on a “network of small businesses” to provide small business financing. These network loans would serve as an intermediary between borrowers and lenders. Small business financing programs would pool resources from a variety of sources and focus on increasing business capacity and development in a way that national banks cannot. Additionally, this type of lending and finance would create a stable, predictable source of income for those companies in need of quick cash. In this way, a “circular flow of capital” was created to facilitate and support the economic development of small businesses.
One major drawback to this type of lending is that these small-business finance programs cannot deal with the complex issues of land and property ownership and tax valuation. Because most cities and counties do not currently allow for this type of private investment, most traditional banks are not comfortable funding these ventures. As such, a great deal of time and money is required to set-up the various legal relationships needed to function as a conduit between investors and borrowers. Also, many of these businesses are highly specialized in producing products and services that are in high demand and thus may not be in position to receive a traditional loan from a traditional lender.
In summary, we believe macroeconomics and microeconomics are closely intertwined and interconnected with one another. The state of the economy will often depend on the health of one of the components. Macroeconomics is the study of the interactions between national economies. Microeconomics is the study of the interactions of individual households and firms. Our focus is on microeconomics, which we believe is an essential part of understanding the macroeconomics.