Big Business Is Helping America Survive the Coronavirus

(Bloomberg Opinion) -- When President Donald Trump called several U.S. CEOs to the microphone at his coronavirus press conference last week, it was more than just symbolic. Whether Americans like it or not, Covid-19 is ushering in an era when big business will be more important than ever.

As people start reacting to Covid-19, they are looking mostly to the larger businesses for assistance. Costco and Walmart are packed. Amazon and UPS are delivering our packages. For entertainment at home, Americans are relying on Netflix and the cable companies. For information on Covid-19, Twitter is a very useful stop. As hospitals become overcrowded, CVS and Rite Aid may become important as local health centers and sources of community information.

It turns out that the larger, more profitable businesses are the ones that have the talent, the command of public attention and the financial resources to adjust to these changing conditions.

Big business also has been ahead of the curve when it comes to prediction and adjustment. The NBA postponed its season before most politicians, including the president, realized the gravity of the situation.

Only a month ago, there were headlines mocking Silicon Valley for being overly concerned with Covid-19 and for avoiding handshakes. The tech community had a high degree of advance awareness of Covid-19 problems, and it was ready with telework and other adjustments when the time came. The tech world’s penchant for carrying what seemed to be absurdly large surpluses of cash — last year Apple had over $100 billion in cash reserves — now also seems prescient. Apple’s stores are currently closed in most parts of the world.

Some of the biggest economic losers from Covid-19 will be economies that rely more on small business rather than big business. The lockdowns in Italy, for example, will be very painful for the large numbers of small, family-run businesses that rely on everyday contact with their customers. The gelato shop and the kiosk and the small bar will be more vulnerable than America’s corporate behemoths. Furthermore, they may be vulnerable to a small number of their workers getting sick.

Larger businesses are also easier to assist if necessary. Whatever you think of the forthcoming bailout of the major U.S. airlines, logistically it will not be very difficult to pull off, since the targets are large and obvious and relatively easy to monitor. Banks are willing to lend to them, because they know the government does not contemplate a world without major airlines.

It is much more difficult to bail out the millions of small and medium-sized enterprises around the world that will demand assistance. How do you find and track them? How can you tell which have no chance of bouncing back? Government bureaucracies cannot easily deal with those problems, and in turn private banks do not perceive governments to be making credible commitments to these small businesses. By contrast, there are numerous precedents for governmental aid or loans to airlines or other major businesses.

Whether Americans like it or not, after the worst of Covid-19 is over, theirs is going to be a nation where big business plays a larger role. The title of my most recent book gives some indication where I stand, and I predict more Americans will come to a new appreciation of big business over the coming months.

Business itself, including big business, is increasingly relying on distanced communications. WhatsApp messaging groups are active, while Skype calls are replacing the face-to-face meeting; WhatsApp, of course, is owned by Facebook, Skype by Microsoft. Zoom, whose calls are known for their reliability, is not yet a big business, but I predict it will be fairly soon.

Most institutions of higher education are shutting down or postponing their operations. Alternative arrangements are still being worked out, but again I expect big business will play a major role in the transition. Skype and Zoom sessions will replace many a class, and the textbook companies are stepping forward with electronic portals that present classroom materials, interactive exercises and grade student answers. (Disclaimer: Macmillan Worth offers an electronic portal version of my own economics textbook.)

Some governments in East Asia have done a good job responding to the Covid-19 crisis. It is hard to say the same for the U.S. or Western Europe. The legacy of that failure is likely to be a further decline of trust in government. And a consequence of that failure is that, when Americans need answers or simply a useful good or service, they are increasingly going to turn to the one institution that can reliably provide them: big business.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."

©2020 Bloomberg L.P.