FROM 'TRICKLE DOWN' TO 'POWER UP' ECONOMICS
Building-back the flywheel of local spending power to get
small businesses moving again
By embracing a range of unprecedented measures, like social distancing, online schooling and ‘knock and drop’ food deliveries for the elderly, local communities are banding together to ‘flatten the curve’ on the coronavirus.
What we need now is to band together as communities to 'flatten the curve' on small business bankruptcy.
In the United States, small business accounts for around 44% of national GDP and 47% of the workforce. Most of them run on thin margins and low cash floats. With stock on the shelves before the Covid-19 lockdown now out of date, liabilities accumulating and incomes decimated in a matter of weeks, many small businesses have been left with no choice but to lay-off hard-working staff and are struggling to pay the rent.
Opening their doors after lockdown is only the first step. Reduced on-site seating or customer service capacity is necessary for public health reasons but it is going to have a devastating economic impact for many local businesses. What Main Street needs is an pathway back to sustainable profitability. The real risk now is that a large percentage of small businesses go bankrupt. They may never reopen their doors. If they do, they might limp along for 6-12 months or the remainder of their lease term before closing down for good.
Without the Main Street economy working, businesses and workers right through the supply chain, all the way back to the factory floor and the farm gate, will be adversely impacted by a slowdown in demand. From mid-March to the end of April almost 30 million Americans had filed for unemployment benefits.
Relying on trickle-down stimulus is ultimately not going to work. The first tranche of Paycheck Protection Program (PPP) funding, some $340 billion, ran out in just 13 days. A short-term surge in financial assistance will help, but Government is inherently constrained in what it can do, how fast it can move, how far it can go and how long its support can last.
It's time for what we call 'Power-Up Economics': locally inspired, community campaigns to get the flywheel or people and cash in local communities moving again to support local business.
Power-Up Economics is one-part college micro-economics and three-parts behavioral economics - the leveraging of psychological insights to 'nudge' human behaviour to spend in Main Street shops.
Smart behavioral nudges are critical right now. We need to feel safe entering shops and restaurants again and we need incentives to do so given the relative ease of shopping online and the decline in household income now facing millions of families as a result of the sudden onset of unemployment.
The beauty of Power-Up Economics is that it isn't expensive and communities are fully empowered to move quickly to act. It's about harnessing the creative commons and effective collaboration between local business associations and city hall. Above all Power-Up Initiatives need to be inspired, collaborative and practical.
Power-Up My Neighborhood is designed to inspire and support cities, towns and villages everywhere as they come together to launch Power-Up Initiatives to help get their local Main Street businesses on a financially sustainable glide-path out of this crisis.
We don't yet know what the 'new normal' might look like, nor how long it will take to get there. But we know small business and a vibrant local community need to be at the heart of our future. It's hard to imagine one without them.