Now What?

For Americans, the Depression years are distressing and painful, with many families barely surviving. The situation is quite different for managers, who only need to cut back on payrolls for a while, until business improves.

But the old bedrock has disappeared from beneath their feet, with the collapse of railroads, and shaky recovery in iron. The economy needs something new to restore consumer confidence, and give a fresh boost to sales.

In the past, new technologies seemed to appear every few decades to pump up the economy. But not this time. In the end, business survives the 1930s by tweaking business models to improve efficiency.
Railroads and corporations, 1940s

  New Focus on Customers
The charts above illustrate the problems facing business. Most serious is the flat-lining of railroads (top right), which hurts steel first, and then manufacturing in general. The first reaction is to let workers go. After that, companies sacrifice profits (lower right). Now, they introduce handy new shopping carts, making it easier for consumers to spend money (top left).

A&P, JC Penney and chain stores, 1940s

  Mass Retail
The beauty of chain stores is simplicity. Once you work out a successful formula for products and floor space, you can replicate it thousands of times, in thousands of locations. The important thing is having the right formula. The chart shows that the dominant chain store is the grocer A&P. By a mile. The A&P formula involves severe cost-cutting, which allows the chain to open stores in 15,000 locations. Then, it closes half these stores, opening instead 1,100 upsized new 'supermarkets.' Sales increase by 50%.


Manufacturing corporate giants, 1940s

  Bigger is Better
The rate of corporate bankruptcy barely rises at all during the Depression. This is due largely to the ability to shed workers, as orders decline, but another factor is the unstoppable trend towards bigness. The larger the company, the more effort can be focused on improving efficiency. The left-hand chart shows that sales are fairly evenly distributed, by size. The right-hand chart shows that profitability rises in a straight line. Profits for the smallest are nearly zero, while those of the largest average 11%.