month the biggest business handout in history has begun. The goal of helping firms survive temporary lockdowns is sensible, but it is hard not to feel uneasy . At least $8trn of state loans and goodies have been promised to private firms in America and Europe, roughly equivalent to all their profits over the past two years. Over half a million European firms have applied for payroll subsidies.
Ideally private investors would swoop in—Warren Buffett is sitting on $125bn of spare funds and Blackstone’s funds have $151bn. But the duration of lockdowns is unclear, so they may be reluctant. As a result, alongside widely available cheap state loans, bespoke state bail-outs are starting. America’s latest stimulus package earmarks at least $50bn for the airlines and other firms vital for “national security” .
What to do? Governments need to offer support for business in an integrated way. There should be blanket offers to all firms of cheap loans and help in paying the wages of inactive staff for three to six months with few strings attached. This is what the $8trn of loans and guarantees mostly try to do, but there are gaps and doubts about how small firms will get cash.
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