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National Recovery Administration

 
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National Recovery Administration

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National Recovery Administration (NRA). The National Recovery Administration was the most ambitious effort ever to enact federal planning of the economy during peacetime. As such, it was the culmination of interest in planning that arose during the Progressive Era and climaxed during World War I when the War Industries Board (WIB) mobilized agriculture, industry, and transportation for the war effort. After the wartime planning ended, the urge to have expert, cooperative management of the economy, rather than competition held in check by antitrust legislation, remained strong. In the private sector it resulted in the creation of management and labor councils in several industries, the rise of organizations dedicated to planned conservation of natural resources, and expressions of admiration for state planning in revolutionary nations, especially Fascist Italy and Soviet Russia. Within the federal government, Herbert Hoover focused his work as secretary of commerce and then as president on fostering voluntary association between industry and government as a way to establish fair and efficient business practices.

Franklin Roosevelt also developed an interest in planning during his government service in World War I and was quick during his 1932 campaign for the presidency to endorse the recovery plan of the president of General Electric, Gerard Swope, to set up trade associations under the direction of the Federal Trade Commission and a national workmen's compensation law to provide a financial cushion for unemployed, disabled, and retired workers. After taking office Roosevelt summoned Swope to Albany for a talk and listened attentively to Rexford Tugwell and others in his "brains trust" who favored measures that would go beyond the self-regulation urged by Swope to outright government coordination of the economy. Out of those discussions arose the design for the National Industrial Recovery Act (NIRA), which was voted into law by Congress on 16 June 1933.

The NIRA and its implementing agency, the NRA, struck a balance between industrial self-regulation and governmental planning in an effort to serve the interests of all parties. The act authorized councils composed of representatives from industry, government, and consumer groups to draw up codes of fair wages and prices for each industry. To foster cooperative integration of the economy, rather than competition, the act suspended antitrust laws for those whose codes were accepted by the government. A group offering a code had to be truly representative of the trade or industry involved, and no code could be designed to promote monopoly or oppress or eliminate small enterprises. Every code also had to provide for maximum hours and minimum wages and abide by section 7a, guaranteeing freedom for workers to join their own unions. Within a year nearly all American industry was codified.

The NRA failed to live up to hopes that it would fundamentally reform the economy and lead to recovery with full employment. One problem was that the chief administrator, Hugh Johnson, chosen because of his energetic service in the WIB during World War I, proved to be unstable and failed to inspire cooperation. As Johnson engaged in promotional campaigns, feuds, and drinking bouts, businessmen exerted their advantage within the councils. They knew their industries' operations far better than government officials and consumer advocates and were well organized to advance self-interest. As a result, the 541 codes eventually completed tended to maintain high prices, low wages, and long hours. Consumer desire for more affordable goods was thwarted, as were plans to reduce unemployment by spreading the work around through shorter hours. Workers also soured on the promises of section 7a as NRA officials repeatedly allowed industries to form company unions, rather than deal with independent labor organizations.

The failure of the NRA dashed progressive hopes for a planned economy. Yet it did demonstrate that active governmental involvement in the running of the economy was possible. In particular, the NRA established the principle of maximum hours and minimum wages on a national basis, abolished child labor, and made collective bargaining a national policy, setting the stage for the transformation of organized labor.

By the time the authorization of the NIRA approached its end in early 1935, public support had dwindled, and the chances for renewal in Congress were in doubt. The Supreme Court then delivered the death blow in the case of Schechter Poultry Corporation v. United States (1935), which ruled that NRA codes were an unconstitutional delegation of legislative power and further violated the Constitution by regulating commerce within sovereign states. Although Congress acceded to the president's wish for renewal, the NRA had lost its powers and was terminated on 1 January 1936.

Bibliography

Brand, Donald R. Corporatism and the Rule of Law: A Study of the National Recovery Administration. Ithaca, N.Y.: Cornell University Press, 1988.

Hawley, Ellis W. The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence. Princeton, N.J.: Princeton University Press, 1966. The classic work on the importance of the NRA to New Deal policy.

Himmelberg, Robert F. The Origins of the National Recovery Administration. New York: Fordham University Press, 1976.

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Columbia Encyclopedia:

National Recovery Administration

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National Recovery Administration (NRA), in U.S. history, administrative bureau established under the National Industrial Recovery Act of 1933. In response to President Franklin Delano Roosevelt's congressional message of May 17, 1933, Congress passed the National Industrial Recovery Act, an emergency measure designed to encourage industrial recovery and help combat widespread unemployment. The act called for industrial self-regulation and declared that codes of fair competition-for the protection of consumers, competitors, and employers-were to be drafted for the various industries of the country and were to be subject to public hearings. The administration was empowered to make voluntary agreements dealing with hours of work, rates of pay, and the fixing of prices. Employees were given the right to organize and bargain collectively and could not be required, as a condition of employment, to join or refrain from joining a labor organization. The NRA-by a separate executive order-was put into operation soon after the final approval of the act. President Roosevelt appointed (June, 1933) Hugh S. Johnson as administrator for industrial recovery. Until Mar., 1934, the NRA was engaged chiefly in the drawing up of industrial codes; a blanket code for all industries was adopted, and well over 500 codes of fair practice were adopted for the various industries. Patriotic appeals were made to the public, and firms were asked to display the Blue Eagle, an emblem signifying NRA participation. Attacked in certain quarters as authoritarian, the NRA did not last long enough to fully implement its policies. In May, 1935, in the case of the Schechter Poultry Corp. v. United States the U.S. Supreme Court invalidated the compulsory-code system on the grounds that the NRA improperly delegated legislative powers to the executive and that the provisions of the poultry code did not constitute a regulation of interstate commerce. The NRA was extended in skeletonized form until Jan. 1, 1936. Many labor provisions of the NRA were reenacted in later legislation (see Fair Labor Standards Act and National Labor Relations Board).

Bibliography

See L. S. Lyon et al., The National Recovery Administration (1933, repr. 1972); C. L. Dearing et al., The ABC of the NRA (1934); C. A. Pearce, NRA Trade Practice Programs (1939).

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National Recovery Administration

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In 1935, the U.S. Supreme Court unanimously declared that the NIRA law was unconstitutional, ruling that it infringed the separation of powers under the United States Constitution. The NRA quickly stopped operations, but many of its labor provisions reappeared in the National Labor Relations Act (Wagner Act), passed later the same year. The long-term result was a surge in the growth and power of unions, which became a core of the New Deal Coalition that dominated national politics for the next three decades.

The NRA, symbolized by the Blue Eagle (a blue-colored representation of the American thunderbird) was popular with workers. Businesses that supported the NRA put the symbol in their shop windows and on their packages. Though membership to the NRA was voluntary, businesses that did not display the eagle were very often boycotted, making it seem to many mandatory for survival.

Contents

Background

As part of the "First New Deal," the NRA was based on the premise that the Great Depression was caused by market instability and that government intervention was necessary to balance the interests of farmers, business and labor. The NIRA, which created the NRA, declared that codes of fair competition should be developed through public hearings, and gave the Administration the power to develop voluntary agreements with industries regarding work hours, pay rates, and price fixing.[1] The NRA was put into operation by an executive order, signed the same day as the passage of the NIRA.

New Dealers who were part of the administration of President Franklin D. Roosevelt saw the close analogy with the earlier crisis handling the economics of World War I. They brought ideas and experience from the government controls and spending of 1917-18.

In his June 16, 1933 "Statement on the National Industrial Recovery Act," President Roosevelt described the spirit of the NRA: "On this idea, the first part of the NIRA proposes to our industry a great spontaneous cooperation to put millions of men back in their regular jobs this summer."[2] He further stated, "But if all employers in each trade now band themselves faithfully in these modern guilds--without exception-and agree to act together and at once, none will be hurt and millions of workers, so long deprived of the right to earn their bread in the sweat of their labor, can raise their heads again. The challenge of this law is whether we can sink selfish interest and present a solid front against a common peril."[2]

Inception

Director Hugh S. Johnson on the cover of Time Magazine in 1933.
The film industry supported the NRA

The first director of the NRA was Hugh Samuel Johnson, a retired United States Army general and a successful businessman. He was named Time magazine's "Man of the Year" in 1933. Johnson saw the NRA as a national crusade designed to restore employment and regenerate industry.

Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35 to 45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.

To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost his bargaining strength to negotiate the codes with business and labor.

Historian Clarence B. Carson noted:

At this moment in time from the early days of the New Deal, it is difficult to recapture, even in imagination, the heady enthusiasm among a goodly number of intellectuals for a government planned economy. So far as can now be told, they believed that a bright new day was dawning, that national planning would result in an organically integrated economy in which everyone would joyfully work for the common good, and that American society would be freed at last from those antagonisms arising, as General Hugh Johnson put it, from "the murderous doctrine of savage and wolfish individualism, looking to dog-eat-dog and devil take the hindmost."[3]

Roosevelt replaced Johnson in September 1934.

Coal

The negotiations of a code for the bituminous coal industry came against the background of a rapidly swelling union, the United Mine Workers headed by John L. Lewis and an unstable truce in the Pennsylvania coal fields. The NRA tried to get the principals to compromise with a national code for a decentralized industry in which many companies were antiunion, sought to keep wage differentials, and tried to escape the collective bargaining provisions of section 7A. Agreement among the parties was finally reached only after the NRA threatened that it would impose a code. The code did not establish price stabilization, nor did it resolve questions of industrial self-government versus governmental supervision or of centralization versus local autonomy, but it made dramatic changes in abolishing child labor, eliminating the compulsory scrip wages and company store, and establishing fair trade practices. It paved the way for an important wage settlement.[4]

Price controls

In early 1935 the new chairman, Samuel Williams announced that the NRA would stop setting prices, but businessmen complained. Chairman Williams told them plainly that, unless they could prove it would damage business, NRA was going to put an end to price control. Williams said, "Greater productivity and employment would result if greater price flexibility were attained."[5] Of the 2,000 businessmen on hand probably 90% opposed Mr. Williams' aim, reported Time magazine: "To them a guaranteed price for their products looks like a royal road to profits. A fixed price above cost has proved a lifesaver to more than one inefficient producer."[5] However, it was also argued NRA's price control method promoted monopolies.[6]

The business position was summarized by George A. Sloan, head of the Cotton Textile Code Authority:

"Maximum hours and minimum wage provisions, useful and necessary as they are in themselves, do not prevent price demoralization. While putting the units of an industry on a fair competitive level insofar as labor costs are concerned, they do not prevent destructive price cutting in the sale of commodities produced, any more than a fixed price of material or other element of cost would prevent it. Destructive competition at the expense of employees is lessened, but it is left in full swing against the employer himself and the economic soundness of his enterprise....But if the partnership of industry with Government which was invoked by the President were terminated (as we believe it will not be), then the spirit of cooperation, which is one of the best fruits of the NRA equipment, could not survive.[5]

Critics

Most businesses adopted the NRA without complaint, but Henry Ford was reluctant to join.[7]

The National Recovery Review Board, headed by noted criminal lawyer Clarence Darrow, a prominent liberal, was set up by President Roosevelt in March 1934 and abolished by him that same June. The board issued three reports highly critical of the NRA from the perspective of small business, charging the NRA with fostering monopolies. The Darrow board, influenced by Justice Louis D. Brandeis, wanted instead to promote competitive capitalism.[8]

Representing big business, the American Liberty League, 1934–40, was run by leading industrialists who opposed the liberalism of the New Deal. Regarding the controversial NRA, the League was ambivalent. Jouett Shouse, the League president, commented that "the NRA has indulged in unwarranted excesses of attempted regulation"; on the other, he added that "in many regards [the NRA] has served a useful purpose."[9] Shouse said that he had "deep sympathy" with the goals of the NRA, explaining, "While I feel very strongly that the prohibition of child labor, the maintenance of a minimum wage and the limitation of the hours of work belong under our form of government in the realm of the affairs of the different states, yet I am entirely willing to agree that in the case of an overwhelming national emergency the Federal Government for a limited period should be permitted to assume jurisdiction of them."[10]

The NRA in practice

Chart 3: Manufacturing employment in the United States from 1920 to 1940

The NRA negotiated specific sets of codes with leaders of the nation's major industries; the most important provisions were anti-deflationary floors below which no company would lower prices or wages, and agreements on maintaining employment and production. In a remarkably short time, the NRA won agreements from almost every major industry in the nation. Six months after the NRA went into effect, industrial production dropped twenty-five percent. According to some economists, the NRA increased the cost of doing business by forty percent.[11] Donald Richberg, who soon replaced Johnson as the head of the NRA said:

There is no choice presented to American business between intelligently planned and uncontrolled industrial operations and a return to the gold-plated anarchy that masqueraded as "rugged individualism."...Unless industry is sufficiently socialized by its private owners and managers so that great essential industries are operated under public obligation appropriate to the public interest in them, the advance of political control over private industry is inevitable.[12]

By the time it ended in May 1935, industrial production was 22% higher than in May 1933.

Specific industries

Pennock (1997) shows that the rubber tire industry faced debilitating challenges, mostly brought about by changes in the industry's retail structure and exacerbated by the Depression. Segments of the industry attempted to use the NRA codes to solve these new problems and stabilize the tire market, but the tire manufacturing and tire retailing codes were patent failures. Instead of leading to cartelization and higher prices, which is what most scholars assume the NRA codes did, the tire industry codes led to even more fragmentation and price cutting.[13]

Alexander (1997) examines the macaroni industry and concludes that cost heterogeneity was a major source of the "compliance crisis" affecting a number of NRA "codes of fair competition" that were negotiated by industries and submitted for government approval under the National Industry Recovery Act of 1933. The argument boils down to assumptions that progressives at the NRA allowed majority coalitions of small, high-cost firms to impose codes in heterogeneous industries, and that these codes were designed by the high-cost firms under an ultimately erroneous belief that they would be enforced by the NRA.[14]

Storrs (2000) says the National Consumers' League (NCL) had been instrumental in the passage and legal defense of labor legislation in many states since 1899. Women activists used the New Deal opportunity to gain a national forum. General Secretary Lucy Randolph Mason and her league relentlessly lobbied the NRA to make its regulatory codes just and fair for all workers and to eliminate explicit and de facto discrimination in pay, working conditions, and opportunities for reasons of sex, race, or union status. Even after the demise of the NRA, the league continued campaigning for collective bargaining rights and fair labor standards at both federal and state levels.[15]

Enforcement of codes

About 23 million people were employed under the NRA codes. However, violations of codes became common and attempts were made to use the courts to enforce the NRA. The NRA included a multitude of regulations imposing the pricing and production standards for all sorts of goods and services. Individuals were arrested for not complying with these codes. For example, one small businessman was fined for violating the "Tailor's Code" by pressing a suit for 35 rather than NRA required 40 cents. Roosevelt critic John T. Flynn, in The Roosevelt Myth (1944), wrote:

“ The NRA was discovering it could not enforce its rules. Black markets grew up. Only the most violent police methods could procure enforcement. In Sidney Hillman’s garment industry the code authority employed enforcement police. They roamed through the garment district like storm troopers. They could enter a man’s factory, send him out, line up his employees, subject them to minute interrogation, take over his books on the instant. Night work was forbidden. Flying squadrons of these private coat-and-suit police went through the district at night, battering down doors with axes looking for men who were committing the crime of sewing together a pair of pants at night. But without these harsh methods many code authorities said there could be no compliance because the public was not back of it. ”


The NRA was famous for its bureaucracy. Journalist Raymond Clapper reported that between 4,000 and 5,000 business practices were prohibited by NRA orders that carried the force of law, which were contained in some 3,000 administrative orders running to over 10 million pages, and supplemented by what Clapper said were "innumerable opinions and directions from national, regional and code boards interpreting and enforcing provisions of the act." There were also "the rules of the code authorities, themselves, each having the force of law and affecting the lives and conduct of millions of persons." Clapper concluded: "It requires no imagination to appreciate the difficulty the business man has in keeping informed of these codes, supplemental codes, code amendments, executive orders, administrative orders, office orders, interpretations, rules, regulations and obiter dicta."[16]

Judicial review

On 27 May 1935, in the court case of Schechter Poultry Corp. v. United States, the Supreme Court held the mandatory codes section of NIRA unconstitutional,[17] because it attempted to regulate commerce that was not interstate in character, and that the codes represented an unacceptable delegation of power from the legislature to the executive. Chief Justice Charles Evans Hughes wrote for a unanimous Court in invalidating the industrial "codes of fair competition" which the NIRA enabled the President to issue. The Court held that the codes violated the United States Constitution's separation of powers as an impermissible delegation of legislative power to the executive branch. The Court also held that the NIRA provisions were in excess of congressional power under the Commerce Clause.[18]

The Court distinguished between direct effects on interstate commerce, which Congress could lawfully regulate, and indirect, which were purely matters of state law. Though the raising and sale of poultry was an interstate industry, the Court found that the "stream of interstate commerce" had stopped in this case: Schechter's slaughterhouses bought chickens only from intrastate wholesalers and sold to intrastate buyers. Any interstate effect of Schechter was indirect, and therefore beyond federal reach.[19]

Specifically, the Court invalidated regulations of the poultry industry promulgated under the authority of the National Industrial Recovery Act of 1933, including price and wage fixing, as well as requirements regarding a whole shipment of chickens, including unhealthy ones, which has led to the case becoming known as "the sick chicken case." The ruling was one of a series which overturned some New Deal legislation between January 1935 and January 1936, and which ultimately caused Roosevelt to attempt to pack the Court with judges that were in favor of the New Deal.

Subsequent to the decision, the remainder of Title I was extended until April 1, 1936, by joint resolution of Congress (49 Stat. 375), June 14, 1935, and NRA was reorganized by E.O. 7075, June 15, 1935, to facilitate its new role as a promoter of industrial cooperation and to enable it to produce a series of economic studies,[17] which the National Recovery Review Board was already doing.[20] Many of the labor provisions reappeared in the Wagner Act of 1935.

Notes

  1. ^ National Recovery Administration. The Columbia Encyclopedia, Sixth Edition. 2001-07
  2. ^ a b Franklin D. Roosevelt Presidential Library and Museum - Our Documents
  3. ^ Carson, Clarence B. The Relics of Intervention part 4. New Deal Collective Planning
  4. ^ James P. Johnson, "Drafting the NRA Code of Fair Competition for the Bituminous Coal Industry," Journal of American History, Vol. 53, No. 3 (Dec., 1966), pp. 521-541 in JSTOR
  5. ^ a b c "Dollar Men & Prices". Time. Jan 21, 1935. http://www.time.com/time/magazine/article/0,9171,787937,00.html. 
  6. ^ http://eh.net/encyclopedia/article/alexander.nra
  7. ^ Dan Cooper and Brian Grinder, "We Do Our Part: Henry Ford and the NRA," Financial History, Spring 2009, Issue 94, pp 10-35
  8. ^ Stephen J. Sniegoski, "The Darrow Board and the Downfall of the NRA," Continuity, 1990, Issue 14, pp 63-83
  9. ^ Ronen Shamir, Managing Legal Uncertainty: Elite Lawyers in the New Deal (1995) p. 22
  10. ^ Shamir, pp 24-25
  11. ^ Reed, Lawrence W. Great Myths of the Great Depression Mackinac Center for Public Policy.
  12. ^ Arthur Meier Schlesinger, Jr. The Coming of the New Deal, Houghton Mifflin Books (2003), p. 115.
  13. ^ Pamela Pennock, "The National Recovery Administration and the Rubber Tire Industry, 1933-1935." Business History Review," 1997 71(4): 543-568 in JSTOR
  14. ^ Barbara J. Alexander, "Failed Cooperation in Heterogeneous Industries under the National Recovery Administration." Journal of Economic History, 1997 57(2): 322-344 in JSTOR
  15. ^ Landon R. Storrs, Civilizing Capitalism: The National Consumers' League, Women's Activism, and Labor Standards in the New Deal Era, (U of North Carolina Press, 2000) online edition
  16. ^ Clapper in Washington Post, Dec. 4, 1934, quoted in Best, 79-80 (1991).
  17. ^ a b National Recovery Administration, Authority Record (Corporate Body) USA, Committee on Descriptive Standards, International Council on Archives. Accessed 11 November 2010
  18. ^ Tim McNeese and Richard Jensen, The Great Depression 1929-1938 (2010) p. 90
  19. ^ Steven Emanuel and Lazar Emanuel, Constitutional Law (2008) p. 31
  20. ^ Executive Order 6632 Creating The National Recovery Review Board. March 7, 1934

Bibliography

  • Alexander, Barbara. "The Impact of the National Industrial Recovery Act on Cartel Formation and Maintenance Costs," Review of Economics and Statistics Vol. 76, No. 2 (May, 1994), pp. 245–254 in JSTOR
  • Best; Gary Dean. Pride, Prejudice, and Politics: Roosevelt Versus Recovery, 1933-1938. (1991) online edition ISBN 0275935248
  • Brand, Donald R. "Corporatism, the NRA, and the Oil Industry." Political Science Quarterly 1983 98(1): 99-118. in JSTOR Uses corporatism model to explore the struggle between independent oil producers and major oil producers over production and price controls.
  • Burns, Arthur Robert. "The First Phase of the National Industrial Recovery Act, 1933," Political Science Quarterly Vol. 49, No. 2 (Jun., 1934), pp. 161–194 in JSTOR
  • Dearing, Charles L. et al. The ABC of the NRA, (1934) 200 pgs. online edition
  • Hawley, Ellis W. The New Deal and the Problem of Monopoly (Princeton UP, 1968) ISBN 0823216098, the classic scholarly history
  • Hawley, Ellis W. "The New Deal and Business," in The New Deal: The National Level ed by Robert H. Bremner and David Brody; Ohio State University Press. (1975) pp 50–82, online edition
  • Johnson; Hugh S. The Blue Eagle, from Egg to Earth 1935, memoir by NRA director online edition
  • Lyon, Leverett S., Paul T. Homan, Lewis L. Lorwin, George Terborgh, Charles L. Dearing, Leon Marshall C.; The National Recovery Administration: An Analysis and Appraisal The Brookings Institution, 1935. in-depth analysis by economists, online edition
  • Ohl, John Kennedy. Hugh S. Johnson and the New Deal (1985), academic biography. ISBN 0875801102
  • Schlesinger, Arthur Meier. The Coming of the New Deal (1958) pp 87–176
  • Sniegoski, Stephen J. "The Darrow Board and the Downfall of the NRA." Continuity 1990 (14): 63-83. Issn: 0277-1446
  • Taylor, Jason E. "Cartel Code Attributes and Cartel Performance: An Industry‐Level Analysis of the National Industrial Recovery Act," Journal of Law and Economics Vol. 50, No. 3 (August 2007) pp. 597–624 in JSTOR

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