What government policies can help businesses survive economic crises?

Small businesses benefit from the government's fiscal expansionary policy during periods of economic contraction (e.g covid-19). This type of fiscal policy has more direct and noticeable effect on the economy's performance while providing financial relief to small businesses through disaster loan programs or/and grants, etc. However, when the implementation of fiscal policy does not appropriately target small (scale) businesses, unintended consequences could emerge and impact returns on government spending.

Government can use both monetary and fiscal policies to help businesses survive by increasing consumption in the economy thereby helping households and firms during an economic crisis such as a recession.

The government should activate the automatic stabilizer mechanism during the crisis to ensure the stability of the economy, and hence helping the creation of the enabling environment for business.

Fiscal policy plays a pivotal role in shaping economic landscapes, especially during crises. By strategically increasing government spending on essential infrastructure, healthcare, and education, nations can stimulate economic activity and create job opportunities. This injection of funds enhances public services and instills confidence among citizens and businesses, fostering increased spending and investments. Tax reductions and subsidies are practical tools, lightening the financial burden on both businesses and consumers. Such measures boost disposable incomes, promoting spending and production and, consequently, propelling economic recovery.

Políticas governamentais desempenham um papel crucial em ajudar as empresas a sobreviver a crises econ?micas. Aqui est?o algumas medidas que os governos podem adotar para apoiar as empresas durante tempos difíceis: Estímulo fiscal: Redu??o de impostos e créditos fiscais podem injetar capital nas empresas, aumentando sua liquidez e ajudando a manter opera??es essenciais.

It depends on the type of the crisis. In general, lowering rates encourages borrowing and spending, stimulating economic activity during economic downturns. Raising rates has the opposite effect, cooling an overheating economy and controlling inflation during economic upswings. For instance, in the current macroeconomic environment, central banks are focusing on reining in inflation by maintaining high interests which has made borrowing costly for businesses. If interest rates remain higher for a long time, this can impact economic activity adversely. Hence, we anticipate lowering interest rates sometime next year to stimulate business activity once again.

Política monetária para auxiliar empresas em crises: Redu??o das taxas de juros para tornar empréstimos mais acessíveis. Compra de ativos para injetar liquidez no sistema financeiro. Fornecimento de empréstimos de emergência para evitar insolvência. Incentivos aos bancos para emprestarem a empresas. Interven??o cambial para estabilizar moedas em casos de dependência de importa??es/exporta??es. Mecanismos de alívio da dívida para renegociar prazos e condi??es. Transparência e comunica??o clara sobre a situa??o econ?mica. Coordena??o com política fiscal para apoiar eficazmente as empresas.

We have to look at the cause of the crisis if the measures to be adopted can work. There is no readily made prescription for every crisis as the type of solution is country and time specific.

Government intervention without relevant conditions has more risks than rewards. During economic crises, there may be moments when government support is necessary to sustain the jobs that have been created. However, the way this support is provided is the major issue. The government often distributes this assistance indiscriminately among struggling businesses, but a more holistic and economically sensible approach would be to weigh the relevance, importance, and future contribution to the country. This kind of approach, of course, is an economic and political choice, which could be considered an investment in the future of the country.

The risk management system should be strengthened to prevent any deterioration in the financial system. Financial stability should be maintained if the crisis to be contained.

Garbage in = garbage out; it’s a cardinal rule of public policy. The idea that ‘certainty’ - the thing that businesses and (most) kinds of capital crave means immovable and/or rigid regulatory regimes is just pure laziness. There is a cost to every business for regulatory compliance, monitoring and enforcement; just as there is for government(s). One of the primary ways governments can provide businesses with competitiveness advantages is to ensure their policy aligns with the business and market reality of that sector. If they are, for example, in a manufacturing sector that is Energy-intensive and Trade-exposed (EITI)…then the kind of regulation around energy matters as much or more than the level of corporate taxation.

Política regulatória para auxiliar empresas em crises envolve medidas como flexibilizar requisitos de capital, estender prazos para cumprimento de regulamenta??es, oferecer isen??es fiscais temporárias, proteger contra práticas comerciais desleais e coordenar a??es interinstitucionais. O objetivo é aliviar a press?o sobre as empresas e facilitar a adapta??o em tempos difíceis.

Regulatory Policy is probably the most underused tool that government can employ to help businesses in times of crises! Apart from banking requirements rules (which the developed world has now shunned as a tool, in fact going in the other direction by adding more constraints during times of crises!), there are many other ways. For example, governments could reduce red tape and bureaucracy to support businesses: this is relatively easy but rarely used. They could also relax competition requirements (for example, by not requiring licenses to operate certain businesses) or decrease the disclosure requirements for small businesses.

Política comercial para auxiliar empresas em crises inclui a redu??o de tarifas, facilita??o do comércio, incentivos às exporta??es, diversifica??o de mercados, negocia??o de acordos comerciais, prote??o contra práticas desleais, redu??o de custos logísticos, estímulo a investimentos estrangeiros, coordena??o com outras políticas e assistência técnica. Essas medidas visam apoiar empresas, expandir seus mercados e protegê-las durante crises econ?micas.

It is very important for government to adjust trade policy according to the business needs in time of crisis. Providing subsidies, less Regulation at ports would help business do their work smoothly.

I am going to be a contrarian: during times of crises, to support the local economy, an economy needs to insulate a bit from external competition. A crises of a couple of years can completely wipe out an industry, with decade-long consequences. For example, if the car industry in Europe goes into a crises due to an economic downturn, there is the possibility that it will completely disappear, replaced by US or Chinese imports. Does it make sense that a country loses a key industry? Millions of workers (and millions of investors, who have our pensions) beg to disagree.

Política industrial para auxiliar empresas em tempos de crises envolve medidas como investimentos em pesquisa e inova??o, incentivos para o desenvolvimento de setores estratégicos, apoio à capacita??o de m?o de obra, estímulo ao empreendedorismo e apoio financeiro para a recupera??o e expans?o de indústrias. O objetivo é fortalecer a resiliência das empresas e impulsionar a economia durante crises econ?micas.

It is true that governments are terrible at choosing winners, but it is also true that incentives matter. Governments can choose industries that they want to develop by decreasing regulations and taxes or by supporting R&D through grants. This approach still allows market forces to function. On the other hand, direct investments by government vehicles have a mixed history - but they can have a place if an industry is deemed strategically important (e.g. defence).

Theoretical economics is far removed by the real world. People are not rational beings: we like wasting time on TikTok and overeating instead of using the time to find a new part-time job. We like being told stories that are engaging and interesting, not boring rules about how to spend your money. However, be like a squirrel and save your acorns in the good times to prepare for the bad - the government might not be there for you all the time!