Page 145 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

started reorienting its portfolio away from capital goods, which
was a declining market, toward the growing consumer-goods
market. Since it understood the potential of the rural electrifi-
cation program and saw its effects, GE accelerated its develop-
ment of consumer goods. The company released the electric
washing machine in 1930, and followed it up with food mixers,
vacuum cleaners, and air conditioners throughout the 1930s. To
help consumers purchase these products, GE launched the
General Electric Credit Corporation in 1932 to provide credit
to consumers unable to obtain financing from the highly con-
strained banks—just as IBM had done for industrial companies
that wanted to buy its pricey business machines.
As we have seen, IBM also benefited from second-order
effects of the New Deal—the demand for sophisticated
accounting tools. In fact, IBM won the biggest contract of the
New Deal era with the Social Security Administration (SSA) in
1935. The SSA needed to manage 120 million postings per year
from 27 million claimants, so the contract proved very prof-
itable for IBM—not only in terms of machine rentals but also
in terms of the sale of the paper punch cards that the machines
used in the days before the invention of internal memory.
Thanks to this and other such government contracts, IBM’s
sales revenue grew by an average of 16 percent per year from
1935 until 1940.
GE and IBM were quick to recognize the potential of gov-
ernment contracts and put themselves in a position to benefit
from them. Today, most companies have yet to take full account
of the government’s role in their plans—but some have clearly
spotted the opportunities.
For example, Peter Löscher, the CEO of Siemens, was
reported by the Financial Times as believing that “infrastructure

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