The most normal business-cycle-ish part of this is what leisure/hospitality, arts/entertainment/recreation, and some retail are facing. There a demand shock is happening, as you can see in re-opening states. However, some big caveats to this....
1. There is no moral hazard, as the potentially failing businesses made no excessively risky decisions.
2. The demand shock has a time limit: when we get the vaccine at most. Yes maybe that will take longer than expected, but I'm willing to bet on our innovative capacities here.
3. Short-run cycle adjustments can be correlated with long-run structural adjustments that make attempts to provide direct relief wasteful, see for example manufacturing in the last 2 recessions.
4. In contrast, leisure and hospitality is structurally growing. This makes the risk of zombie businesses here much less risky. We have an 80 year headwind driving demand up for some of sectors over time.
5. There is no excessive debt burden, irrational exhuberance, bubble-driven malinvestment, or other problem to be worked out of the system. In contrast, demand shocks are correlated with structural growth.
6. Given the magnitude of the shock, we aren't just going to lose unproductive firms in these sectors. We're going to lose productive ones, growing ones, innovative ones, and ones that otherwise have a bright future in a structurally growing industry.
7. Being able to make it through the pandemic is not even going to be correlated with long-run productivity or success. Do you have cash or a cash rich investor, does your food do well for takeout, do you have outdoor space. Not the Qs driving long-run success.
8. Also ,do you have drive through? Are you part of a big national corporation? Again all these add up to failure not likely being a cleansing act of productive reallocation. But more arbitrary, pointless, and negative.
Oh and "what is the local path of the virus?" this is ENTIRELY outside of a businesses control and going to be the first-order determinant of business failure. Does this sound productivity enhancing to you???
