National Industrial Recovery Act of 1933

The National Industrial Recovery Act of 1933 (NIRA) was one of the most important and daring measures of President Franklin D. Roosevelt's New Deal. It was enacted during the famous First Hundred Days of his first term in office and was the centerpiece of his initial efforts to reverse the economic collapse of the Great Depression. NIRA was signed into law on June 16, 1933, and was to remain in effect for two years. It attempted to make structural changes in the industrial sector of the economy and to alleviate unemployment with a public works program. It succeeded only partially in accomplishing its goals, and on May 27, 1935, less than three weeks before the act would have expired, the U.S. Supreme Court ruled it unconstitutional.

Economists, scholars, politicians, and the public at large were deeply divided as to the underlying causes of the Great Depression and the best means to bring it to an end. In the months following Roosevelt's inauguration, his advisers, along with members of Congress and representatives from business and labor, drafted the legislation that was introduced in Congress on May 15, 1933, as the National Industrial Recovery Act. The division of opinions about the Depression was reflected in those who drafted NIRA, and the act drew both praise and criticism from across the political spectrum. Nevertheless, the urgency of the economic situation (with unemployment exceeding 30 percent in many parts of the country) pressured Congress to act.

The House of Representatives passed NIRA by a vote of 325 to 76. When it reached the Senate, however, several powerful senators opposed the bill. Some favored alternative legislation authored by Alabama Senator Hugo L. Black (who Roosevelt would appoint to the U.S. Supreme Court in 1937), which promoted a thirty-hour work week. Some Senate progressives preferred other alternatives to NIRA. Many conservatives opposed any increase in federal powers that would result from NIRA or from other relief measures. Finally, some senators were troubled by the fact that the act suspended the enforcement of antitrust laws at the same time that it called on businesses to play a major role in drafting "codes of fair competition." Given the benefits that business was expected to derive from NIRA, New York Senator Robert F. Wagner, who had helped draft the bill, insisted that it provide a guarantee of collective bargaining for labor. That guarantee was contained in section 7(a) of title I and proved to be the most enduring legacy of NIRA. The Senate eventually approved the bill by a margin of seven votes.

NIRA was divided into three sections, or titles. Title I promoted centralized economic planning by instituting codes of fair competition for industry. Title II provided $3.3 billion for public works projects. Title III contained minor amendments to the Emergency Relief and Construction Act of 1932 (47 Stat. 709).

Title I of the act declared a "national emergency productive of widespread unemployment and disorganization of industry, which burdens interstate and foreign commerce, affects the public welfare, and undermines the standards of living of the American people." To correct this situation, NIRA proposed to "remove obstructions to the free flow of interstate and foreign commerce … to eliminate unfair competitive practices … to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment [and] to improve standards of labor." NIRA was to accomplish these goals through the codes of fair competition, which were essentially sets of rules created on an industry-by-industry basis governing wages, prices, and business practices. The codes were intended to arrest the downward spiral of the economy in which high unemployment depressed wages, which decreased public purchasing power, leading to lower prices and profits (as desperate businesses tried to undersell one another), putting further downward pressure on wages. It was hoped that organized cooperation between business and government would correct what was perceived by some to be waste and inefficiency in the free-market economy.

NIRA created the National Recovery Administration (NRA) to oversee the drafting and implementation of the codes of fair competition. The agency was modeled, in part, after the War Industries Board, which had operated during World War I. To lead NRA, Roosevelt chose former Army General Hugh S. Johnson, who had served as a liaison between the Army and the War Industries Board during World War I. NRA began its work with great fanfare and initially received enthusiastic public support. A massive public relations campaign included the largest parade in the history of New York City. Businesses that adopted the codes were encouraged to advertise the fact by displaying the NRA blue eagle logo with its motto, "We do our part."

The NRA began to work with businesses to establish the mandated codes for fair competition, which were to be exempt from the antitrust laws. Cooperation to this extent among competing businesses would ordinarily be prohibited. Industrial groups first submitted proposed codes to the president for his approval. The president was to approve the codes only if the submitting organization did not restrict membership and was representative of the industry and if the codes themselves promoted the policy of the act. Codes were to neither foster monopolies nor discriminate against small businesses. Once approved, the codes became legally enforceable standards for that trade or industry. Under section 3(c) of the act, federal district courts had jurisdiction over code violations, and U.S. district attorneys were given authority to seek court orders to compel violators to comply with the codes. Section 3(f) provided that any violation affecting interstate or foreign commerce was to be treated as a misdemeanor for which an offender could be fined not more than $500 for each offense; each day during which a violation occurred was to be regarded as a separate offense.

Under Section 7(a), industry codes were required to include provisions for the protection of labor. Provisions for minimum wages and the right to collective bargaining were to increase workers' deflated purchasing power, and limits on number of work hours were to increase employment by spreading the available hours of work among more employees. Section 7(a) also provided that an employee must not be required to join a company union or be prevented from joining any other union as a condition of employment.

Section 7(a) was to have such far-reaching consequences that some labor historians have called it the Magna Charta of the labor movement. Nationwide, union membership grew dramatically. The Amalgamated Clothing Workers, for example, doubled its membership from 60,000 to 120,000 between early 1933 and mid-1934. The United Mine Workers of America quadrupled its membership, from 100,000 to 400,000, less than a year after passage of NIRA.

Under the supervision of the NRA, several hundred industry codes were rapidly enacted, but public support soon diminished. The codes tended to increase efficiency and employment, improve wages and hours, prevent price cutting and unfair competition, and encourage collective bargaining. However, they also tended to raise prices and limit production. Businesses found the codes burdensome. More than 540 codes were promulgated, and it was not unusual for one business to be governed by several, or even several dozen, codes. The codes sometimes conflicted with each other, and businesses occasionally had to pay their workers different rates of pay at different times of the day. Moreover, labor was dissatisfied with the activities of the NRA regarding unions. Although it appears that Congress had intended Section 7(a) of NIRA to assist employees in self-organizing and in discouraging company unions, the NRA interpreted the section in a manner that favored neither labor nor management. Thus, although the NRA sought to ensure that the government protected workers from discrimination resulting from union membership, it did not actively seek to prohibit the creation of company unions, nor did it satisfy many in its efforts to protect the right of individuals not to be coerced into joining a union.

In spite of some NRA successes on behalf of labor — it ended child labor in the textile industry — many in the labor community alleged that the NRA's interpretation of the labor provisions favored employers. Regardless of the NRA's intentions in any given case, few staff members were available for enforcement, and codes were often easily manipulated or avoided.

Title II of NIRA created the Public Works Administration (PWA) to award $3.3 billion in contracts for the construction of public works. (The government did not directly employ workers on PWA projects, as it did in a later New Deal program with a similar name, the Works Progress Administration (WPA).) Secretary of the Interior Harold L. Ickes ran the PWA. Ickes was scrupulously honest in choosing projects and awarding contracts, and he insisted that funds not be wasted. He was successful in that respect, with the result that the benefits of the public works provisions of NIRA were realized too slowly to have much immediate effect on national recovery.

Nevertheless, the PWA did oversee an enormous number and variety of public works projects, including schools, hospitals, post offices, courthouses, roads, bridges, water systems, and waste treatment plants. Its two most prominent projects were the construction of the Triborough Bridge in New York City and the completion of the Boulder (now called the Hoover) Dam on the Colorado River in Arizona. Ultimately the PWA completed more than 34,000 projects around the country.

In spite of the gradual success of the Public Works Administration, the NRA continued to lose the support of the public and its government sponsors. Three weeks before NIRA's two-year expiration date, the Supreme Court unanimously declared it unconstitutional in Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570. The Court held that the act impermissibly delegated legislative power to the NRA and that the application of the act to commerce within the state of New York exceeded the powers granted to the federal government by the Commerce Clause. (The Commerce Clause gives Congress the power to regulate commerce between states, but not within an individual state.) In response to Schechter and to other decisions invalidating New Deal legislation, Roosevelt delivered a famous speech on May 31, 1935, in which he criticized the Supreme Court for employing "the horse and buggy definition of interstate commerce." Subsequent New Deal legislation incorporated some elements of NIRA, most notably the labor provisions of Section 7(a), and ultimately survived the scrutiny of the Supreme Court.

See: Labor Law; Labor Union; Schechter Poultry Corp. v. United States.

When Franklin D. Roosevelt was inaugurated in March 1933, almost 13 million workers—about 25 percent of the workforce—were unemployed. Industrial production was barely half what it had been in 1929. While millions faced starvation, dairy farmers poured fresh milk into the dirt to dramatize the fact that overproduction and cutthroat competition had driven milk prices so low that the farmers could not recover their costs.

To pull the nation out of this crisis, the new administration developed a strategy with two central elements: (1) spreading the available work among larger numbers of employees and (2) increasing the purchasing power of the people. To spread the work available to more workers, the government would limit the number of hours already-employed workers could work, thus reducing the labor performed by these workers and forcing employers to hire new employees from among the unemployed. To increase purchasing power, the government would establish minimum wage rates and launch a public works program (construction projects including schools, hospitals, and bridges) that would pump federal funds into the economy. Instead of restricting hours and wages directly through legislation, the administration proposed to work through private trade associations, which had been unsuccessfully attempting to reduce hours and regulate competition on their own.

On June 16, 1933, President Franklin D. Roosevelt signed the National Industrial Recovery Act (NIRA) (P.L. 73-67, 48 Stat. 195) into law to counter what the act called the "national emergency" that had resulted in "widespread unemployment and disorganization of industry." The act was intended to encourage

cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, ... to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, [and] to improve standards of labor.

Codes of Fair Competition

The NIRA called on private businesses, organized in trade associations, to propose industrial "Codes of Fair Competition" for their industries. Normally, antitrust laws would have prohibited such anticompetitive practices, but the act exempted the codes from antitrust restrictions. Upon approval by the president, the codes became legally binding on all participants in the industry concerned. The act gave the president extensive power to shape the codes. If he wished, he could demand that the trade association accept changes as a condition for his approval. In the event that he received no acceptable code for an industry, he could hold hearings and impose a code of his own.

Later, the act would be criticized for its alleged lack of effective enforcement mechanisms. But on paper those mechanisms appeared strong. The act commanded the district attorneys of the United States to obtain court orders barring code violations. In addition, violators could be criminally prosecuted and punished by fines of up to $500 per violation. Most impressively, the act empowered the president to require that all businesses in an industry obtain a federal license as a condition of doing business in or affecting interstate commerce. Having done so, he could then revoke the license of any code violator—the business equivalent of a death sentence.

To administer the recovery program, President Roosevelt established the National Recovery Administration (NRA), headed by General Hugh S. Johnson. Early on, Johnson decided to rely on consensus and voluntary consent instead of using the act's mechanisms for imposing and enforcing the fair competition codes. The president embraced this conciliatory policy. Johnson feared that if he attempted to force businesses to cooperate, the courts, which at that time tended to restrict economic regulation, might declare the act unconstitutional. Instead of using the law to force compliance, Johnson sought to mobilize public opinion in support of the codes. Businesses that complied would display a blue eagle, the emblem of the NRA, on their product labels or in store windows. Violators would be denied this privilege, triggering a consumer boycott.

During the two years of the program's existence, more than 500 codes were enacted. The standard code contained wage and hours provisions, the essential elements of Roosevelt's recovery strategy. In return for accepting these provisions, businesses in many industries insisted on adding production restrictions and price minimums. Unwilling to use the act's compulsory mechanisms, the NRA had no alternative but to go along. In especially disorganized industries, such provisions might have helped to avoid destructive price declines. But historians believe that in most industries these provisions held back recovery and promoted the interests of the largest and most powerful corporations at the expense of others. The maximum hours provisions did force some work sharing, and it is possible that as many as 2 million unemployed workers obtained jobs as a result. On the other hand, it does not appear that the wage minimums were sufficient to offset price increases.

Labor Under the Blue Eagle

Section 7(a) of the NIRA required that each code prohibit employers from interfering with the workers' right to organize unions. This was the first such protection ever to appear in a generally applicable national statute. Regarded by many as a symbolic concession to labor, section 7(a) turned out to be the act's most contentious provision and arguably the most influential in the long run. As of early 1933, the unionized labor was down to fewer than 3 million members from a high of more than 5 million in 1920. But the year 1933 saw a spectacular upsurge in union organizing. In some industries, like coal and garment manufacturing, this recovery was already far along before section 7(a) was enacted. But in the great mass production industries of automobile, steel, and rubber, where previous organizing efforts had been crushed by mass firings and blacklisting, the upsurge came only after section 7(a) gave workers the confidence to organize.

By themselves, these early gains meant little. The unions had yet to win recognition or contracts from their employers. Employers interpreted section 7(a) to permit the establishment of company-dominated unions, and the Roosevelt administration agreed. Many employers also discharged workers and refused to recognize unions in violation of section 7(a), but the administration was reluctant to bring enforcement actions or even to withdraw the blue eagle. As a result, the unions that made lasting gains during the NIRA period did so through strike action. For example, the United Mine Workers (UMW) increased its membership by more than 300,000—by far the largest gain of any union—but only after local activists organized a powerful strike movement against opposition not only from the coal operators but also from their own union president, John L. Lewis. Unfortunately for the miners, Lewis, who had hand picked the labor representatives on the NRA coal boards, used the boards to defeat competing unions and to consolidate his dictitorial control over the miners' union. This development contributed to the loss of democracy in other industrial unions, which looked to the mine workers for leadership and support.

Court Challenge and the Failure of the Nra Codes

On May 27, 1935, the day known as "Black Monday" to supporters of the New Deal , the U.S. Supreme Court struck down the act's code-making provisions in A.L.A. Schechter Poultry Corp. v. United States. Hugh Johnson had been correct to fear the unconstitutionality of forcing industries to accept the codes. After Schechter, Congress replaced the NIRA with more narrowly focused statutes. Under these statutes, government agencies, instead of representative boards, carried out regulatory and enforcement functions. Examples include the National Labor Relations Act of 1935, which protected the workers' right to organize unions, and the Fair Labor Standards Act of 1938, which set minimum wages and minimum hours.

The verdict of historians on the codes has been largely negative. Most agree that they did little to stimulate recovery, and that they tended to benefit large businesses at the expense of consumers and (although this is less clear) small businesses and labor as well. The reasons for failure are disputed. Some historians focus on the absence of strong presidential leadership to counter the demands of special interests and to ensure effective enforcement. Others point to the lack of clear legal directives in the act itself. Such directives could have prevented large corporations from shaping the codes to their benefit. Still others charge that the act embraced an overly ambitious concept of social cooperation and failed to confront the reality that groups with their own special interests tend to conflict with each other. But the act never received a genuine test. From the outset, administrators feared that the Supreme Court would hold the act unconstitutional. To avoid a constitutional confrontation, they refrained from using its strong provisions for shaping and enforcing codes. In a sense, then, the Supreme Court defeated the NIRA long before the Schechter decision finished it off.

Public Works

One important piece of the NIRA did survive the Schechter decision. The act established an ambitious public works program and created the Public Works Administration (PWA) to administer it. Established barely a decade after the notorious corruption scandals of the Harding Administration (1921–1923), the PWA managed to spend more than $6 billion over a period of six years without any serious charges of corruption. Using a combination of direct spending, loans, and grants, the PWA contributed to thousands of construction projects including schools, government buildings, hospitals, subways, and bridges, most of which were built to high standards and many of which are still in service today.

Bibliography

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Fine, Sidney. The Automobile under the Blue Eagle: Labor, Management, and theAutomobile Manufacturing Code. Ann Arbor: University of Michigan Press, 1963.

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