Page 143 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

both GE and IBM were able to take advantage of them, as we
will discuss in more detail.
While the global economy is not quite as weak today as it
was in 1932, government programs will play an important role
in reviving the economy over the next few years. This will pre -
sent a sizable opportunity for many companies. The scale of
these opportunities is even larger today than it was during the
Great Depression; the first round of stimulus measures, which
began in the third quarter of 2008, has amounted to more than
$2 trillion, and there may be more rounds to come.
Governments today also account for a larger share of the
economy. At the start of the Great Depression, the U.S. gov-
ernment’s share of gross domestic product was below 10 per-
cent. This share rose to 15 percent during the 1930s. In 2008,
the U.S. government’s share of GDP was already close to 20
percent; this share no doubt will rise over the next few years.
Today’s stimulus measures have directly addressed a range of
industries, including health care, infrastructure, clean technol-
ogy, and education. More important, the impact of these meas-
ures will be felt beyond the industries that will receive the stim-
ulus funds. The stimulus also will lead to second-order demand
in complementary industries.
Two of the strongest companies of the last several decades—
GE and IBM—were both beneficiaries of the opportunities
created by New Deal programs during the Great Depression.
Prior to the Depression, the Hoover administration had main-
tained a policy of limited government intervention in the econ-
omy. In 1932, however, Franklin D. Roosevelt was elected—
along with a Democratic majority in Congress—on a platform
of economic recovery through active government intervention.
During the 1930s, the Roosevelt administration abandoned its

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