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Online Extra: Uncertainty for All


For much of the current downturn, small companies seemed oddly immune to the economic pain felt by corporate America. Unlike large outfits, small businesses did not have substantial inventories to work off or bloated payrolls to trim, and few relied on the stock market for financing. In fact, many entrepreneurs felt the economy was poised for a strong recovery and were predicting solid growth in the months ahead.

The Sept. 11 terrorist attacks squelched that sunny projection, and the economic picture is now uncertain for companies large and small. Will the assault tip the country into recession? And how will that recession impact entrepreneurs? Economists and policy analysts are mixed. Here's what a sampling of them had to say to Small Biz.

Brian Headd, economist with SBA's Office of Advocacy:

"We're about to become the world's police force. No one knows what that means. And no economist knows what that means. Confidence and expectations are so important. The longer we go without stability, the worse off we are. In times of uncertainty, people become more conservative. They don't spend. Businesses don't expand. A recession almost becomes a self-fulfilling prophecy -- almost like the flip side of the irrational exuberance we just went through."

William C. Dunkelberg, chief economist, National Federation of Small Business:

"The attacks are a big shock, but for almost everybody, except those in a 20-block area in New York, life will go on as usual. This is not so much a big economic event as much as a big political event. Small businesses are not prone to panic -- even after big economic events. After the 1987 stock market crash, we (the NFIB) were the only people who weren't predicting a horrible recession. The fact is, stock-market gyrations have little to do with the assets of small-business owners. Their asset is their business. I guess I'm not sure what there is to be pessimistic about."

Edward Rogoff, professor of management and director of Baruch College's Field Center for Entrepreneurship in New York City:

"Long-term, it's hard to argue that this is going to have some kind of cataclysmic impact. Not much happened to small business in the Gulf War. Small-business owners tend to be optimistic -- much more so than corporate CEOs. Entrepreneurs tend to be longer-term players than CEOs, who tend to be interested in near-term returns: What are they promising Wall Street next quarter? How can they beat expectations? They want to be as negative as possible so, in six months, they can look great. Entrepreneurs tend to build a business, to create value in the long term for themselves and their families."

Jack Kyser, chief economist, L.A. Economic Development Corp.:

"It's definitely going to push you into recessionary conditions. Consumer confidence is dropping to very low levels, and smaller businesses don't have the financial resources to ride it through. They're operating on thin margins, and many are already struggling with lenders with tough requirements. You have a very volatile situation."

Erik Pages, policy director, National Commission on Entrepreneurship:

"The American response is going to determine everything. If we're truly at war, then that's going to affect the price of oil. And if that happens, all bets are off. But I don't see a crash [even though] the news will not be good. We haven't hit bottom yet, and have 6 to 9 months of muddling around. But we won't see a real profound economic effect."


Reviving Keynes
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