Dambisa Moyo, economist and author of "How Boards Work: And How They Can Work Better in a Chaotic World," sat down with Yahoo Finance Editor-in-Chief Andy Sewer to talk about how small businesses are navigating the re-opening of the U.S. She also discusses the backlash against big business and Biden's economic relief efforts.
ANDY SERWER: Welcome back to Yahoo Finance's special "All Markets Summit Plus, Small Business Recovery."
The COVID-19 pandemic took a big toll on America's small businesses in 2020. But now as the country begins to open back up, we have reason to be optimistic about our economic recovery. Joining me now is Dambisa Moyo, economist and author of a new book on boards in "How Boards Work." Dambisa, nice to see you.
DAMBISA MOYO: Hi, Andy. Nice to see you. Thank you for having me.
ANDY SERWER: So as I mentioned, the COVID-19 downturn really did hit those small businesses harder than the big ones. What can we glean from the initial US economic recovery about how small businesses will fare?
DAMBISA MOYO: Well, I think it's really important to put things in context. We absolutely are in for an amazing rebound. And we're already seeing evidence of that. I mean, every day you wake up, the markets are at a new high. And we're seeing great numbers in terms of sentiment and some of the-- the initial numbers on GDP, not just in the United States, but globally also.
But I think it's really important not to lose sight that a rebound is not a fundamental structural recovery. And there's a lot of stuff that still needs to be resolved. Things like the amount of debt. We've not yet started to think about that debt drag and how that might play out.
As you know, just around the COVID crisis, 14% of US corporations are what they call "zombies." And by that, I mean they're not even able to cover the cost of their interest on their debt using their cash flow. So, real issues structurally in terms of debt.
And, of course, inflation. You know, on the one hand, you would think that the inflationary pressures could benefit small businesses. Clearly, there's aggregate demand that had been shut in last year with the quarantine and with COVID. And as that comes back and large businesses continue to rely on smaller institutions, you know, they're about 75% to 85% of why-- how economies run. But everything from the subcontractors and the delivery of a lot of inputs and goods and services to larger supply chains, you know, what-- what happens this year will be absolutely consequential in terms of small business in their recovery.
ANDY SERWER: Yeah, e-commerce poses a challenge for small companies that don't have economies of scale. How can small businesses adapt?
DAMBISA MOYO: Well, e-commerce, the reality is, the jury's still out. Again, before COVID hit in earnest in 2020, we were already talking about what the implications of digitization could be and specifically around e-commerce. So many aspects in terms of, what would it mean for employment? Like, would it actually reduce costs and really enhance the balance sheet, as companies could actually preserve cash and use the cash on their balance sheets instead of paying salaries, but start to think about using it for R&D?
That was sort of on the upside. But on the downside, there's still a lot of work that needs to be done in terms of risks of [INAUDIBLE] more generally thinking about e-commerce beyond social networks and consumerism. What does e-commerce mean for a lot of the bigger costs that businesses have had to endure, such as health care costs? Is there an angle on e-commerce that might feed into this discussion?
ANDY SERWER: Right. You said last year that the pandemic would lead to a larger role for the government in the economy. And we've certainly seen that with a Biden agenda so far. What's your assessment of federal spending so far, when it comes to supporting small businesses? And will we need more of it?
DAMBISA MOYO: Well, you know, at a very superficial level, you know, on the one hand, the United States desperately needs infrastructure, desperately. Not just traditional infrastructure in the forms of roads and airports and ports in general. We already know that the American Society of Civil Engineers talks about American infrastructure being graded D-plus. This is not a formula for success. So that's great.
But on the other hand, $6 trillion of cash flowing in, with 85% of us looking to receive a $1,400 check, I mean, you have to chime in to the normal queries about, what does that mean for taxation longer-term? What does it mean for inflation? So those structural long-term effects were something that might, basically, make us swoon in the short-term. What does that mean longer-term? And I think businesses are probably going to have to be very thoughtful about how they think about those windfalls, even if they're below that $400,000, certainly on the income tax side.
But, you know, I think the jury's still out. Will it pass? I mean, there's a whole lot of stuff that needs to get going before that. But I think to the extent that we invest in not just traditional infrastructure, but also in digitization, where the US is woefully lacking in many areas, I think it could be good for the economy.
ANDY SERWER: Your new book, "How Boards Work and How They Can Work Better in a Chaotic World," focuses on government structures-- the governance structures, I should say, of larger corporations, especially as they navigate issues like sustainability and diversity. What management lessons, though, can small businesses learn from their bigger counterparts?
DAMBISA MOYO: You know, I think it's quite simply that judgment matters. Like, we just have to get back to basics. Good judgment is going to carry you a long way.
I think that, and I fear actually, that it's very easy to get obsessed with metrics and, you know, the broader sort of ESG agenda. And that's critically important. Don't get me wrong. But, you know, we're going to have to have judgment. Make sure that we're not fighting discrimination with discrimination. We don't want to lose the high-performing white guy. We want to make sure that our efforts in climate change are not alienating people who are continually living in the areas of-- of energy poverty.
And then more generally, whatever we end up doing in the ESG agenda-- and it's so broad-- worker advocacy, data privacy, areas of obesity, gun control, voter rights-- I mean, this is a whole sort of smorgasbord of-- of things to tackle. We want to make sure that we're not just focused on risk mitigation on the downside. We've got to grow. And so we've got to think about upside opportunities as well.
So that, to me, is critically the biggest point. I fear that the ESG agenda, you know, perhaps inadvertently, has tended to focus on risk mitigation-- CO2 emissions, how are we thinking about [INAUDIBLE]. And we're not really pushing or fostering that discussion around, what does this mean for allocating that additional marginal dollar that we have in our pocket? And that's where I think the conversation needs to go.
ANDY SERWER: Author and economist Dambisa Moyo. And her new book is "How Boards Work and How They Can Work Better in a Chaotic World." Thanks so much for coming on.
DAMBISA MOYO: Pleasure, Andy. Thank you.