The
National Recovery Administration (
NRA) was the primary
New DealThe New Deal was a series of economic programs implemented in the United States between 1933 and 1936. They were passed by the U.S. Congress during the first term of President Franklin D. Roosevelt. The programs were Roosevelt's responses to the Great Depression, and focused on what historians call...
agency established by U.S. president
Franklin D. RooseveltFranklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
(FDR) in 1933. The goal was to eliminate "cut-throat competition" by bringing industry, labor and government together to create codes of "fair practices" and set prices. The NRA was created by the
National Industrial Recovery ActThe National Industrial Recovery Act , officially known as the Act of June 16, 1933 The National Industrial Recovery Act (NIRA), officially known as the Act of June 16, 1933 The National Industrial Recovery Act (NIRA), officially known as the Act of June 16, 1933 (Ch. 90, 48 Stat. 195, formerly...
(NIRA) and allowed industries to get together and write "codes of fair competition." The codes were intended to reduce "destructive competition" and to help workers by setting minimum wages and maximum weekly hours, as well as minimum prices at which products could be sold. The NRA also had a two year renewal charter and was set to expire in June of 1935 if not renewed
In 1935, the
U.S. Supreme CourtThe Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
unanimously declared that the NIRA law was unconstitutional, ruling that it infringed the
separation of powers under the United States ConstitutionSeparation of powers is a political doctrine originating from the United States Constitution, according to which the legislative, executive, and judicial branches of the United States government are kept distinct in order to prevent abuse of power. This U.S...
. The NRA quickly stopped operations, but many of its labor provisions reappeared in the
National Labor Relations ActThe National Labor Relations Act or Wagner Act , is a 1935 United States federal law that limits the means with which employers may react to workers in the private sector who create labor unions , engage in collective bargaining, and take part in strikes and other forms of concerted activity in...
(Wagner Act), passed later the same year. The long-term result was a surge in the growth and power of
unionsThe labor history of the United States describes the history of organized labor, as well as the more general history of working people, in the United States. Pressures dictating the nature and power of organized labor have included the evolution and power of the corporation, efforts by employers...
, which became a core of the
New Deal CoalitionThe New Deal Coalition was the alignment of interest groups and voting blocs that supported the New Deal and voted for Democratic presidential candidates from 1932 until the late 1960s. It made the Democratic Party the majority party during that period, losing only to Dwight D. Eisenhower in 1952...
that dominated national politics for the next three decades.
The NRA, symbolized by the
Blue EagleThe Blue Eagle, a blue-colored representation of the American thunderbird, with outspread wings, was a symbol used in the United States by companies to show compliance with the National Industrial Recovery Act...
(a blue-colored representation of the American
thunderbirdThe Thunderbird is a legendary creature in certain North American indigenous peoples' history and culture. It is considered a "supernatural" bird of power and strength...
) 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
boycottA boycott is an act of voluntarily abstaining from using, buying, or dealing with a person, organization, or country as an expression of protest, usually for political reasons...
ed, making it seem to many mandatory for survival.
Background
As part of the "First New Deal," the NRA was based on the premise that the
Great DepressionThe Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
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. 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. RooseveltFranklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
saw the close analogy with the earlier crisis handling the economics of
World War IWorld War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
. 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." 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."
Inception
The first director of the NRA was
Hugh Samuel JohnsonHugh Samuel "Iron Pants" Johnson American Army officer, businessman, speech writer, government official and newspaper columnist. He is best known as a member of the Brain Trust of Franklin D. Roosevelt in 1932-34. He wrote numerous speeches for FDR and helped plan the New Deal...
, a retired
United States ArmyThe United States Army is the main branch of the United States Armed Forces responsible for land-based military operations. It is the largest and oldest established branch of the U.S. military, and is one of seven U.S. uniformed services...
general and a successful businessman. He was named
TimeTime is an American news magazine. A European edition is published from London. Time Europe covers the Middle East, Africa and, since 2003, Latin America. An Asian edition is based in Hong Kong...
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 laborChild labour refers to the employment of children at regular and sustained labour. This practice is considered exploitative by many international organizations and is illegal in many countries...
. 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 EagleThe Blue Eagle, a blue-colored representation of the American thunderbird, with outspread wings, was a symbol used in the United States by companies to show compliance with the National Industrial Recovery Act...
" 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 economyA planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
. 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."
Roosevelt replaced Johnson in September 1934.
Coal
The negotiations of a code for the
bituminous coalBituminous coal or black coal is a relatively soft coal containing a tarlike substance called bitumen. It is of higher quality than lignite coal but of poorer quality than Anthracite...
industry came against the background of a rapidly swelling union, the
United Mine WorkersThe United Mine Workers of America is a North American labor union best known for representing coal miners and coal technicians. Today, the Union also represents health care workers, truck drivers, manufacturing workers and public employees in the United States and Canada...
headed by
John L. LewisJohn Llewellyn Lewis was an American leader of organized labor who served as president of the United Mine Workers of America from 1920 to 1960...
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.
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." 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." However, it was also argued NRA's price control method promoted monopolies.
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.
Critics
Most businesses adopted the NRA without complaint, but
Henry FordHenry Ford was an American industrialist, the founder of the Ford Motor Company, and sponsor of the development of the assembly line technique of mass production. His introduction of the Model T automobile revolutionized transportation and American industry...
was reluctant to join.
The National Recovery Review Board, headed by noted criminal lawyer
Clarence DarrowClarence Seward Darrow was an American lawyer and leading member of the American Civil Liberties Union, best known for defending teenage thrill killers Leopold and Loeb in their trial for murdering 14-year-old Robert "Bobby" Franks and defending John T...
, 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.
Representing big business, the
American Liberty LeagueThe American Liberty League was an American political organization formed in 1934 by conservative Democrats to oppose the New Deal of Franklin D. Roosevelt. It was active for just two years...
, 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." 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."
The NRA in practice
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.
Donald RichbergDonald Randall Richberg was an American attorney, civil servant, and author who was one of President Franklin D. Roosevelt's key aides and who played a critical role in the New Deal. He co-wrote the National Industrial Recovery Act, was general counsel and executive director of the National...
, 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.
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.
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.
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.
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. FlynnJohn Thomas Flynn was an American journalist best known for his opposition to President Franklin D. Roosevelt and to American entry into World War II.-Career:...
, in
The Roosevelt Myth (1944), wrote:
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."
Judicial review
On 27 May 1935, in the court case of
Schechter Poultry Corp. v. United StatesA.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 , was a decision by the Supreme Court of the United States that invalidated regulations of the poultry industry according to the nondelegation doctrine and as an invalid use of Congress's power under the commerce clause...
, the Supreme Court held the
mandatory codes section of NIRA unconstitutional, 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 HughesCharles Evans Hughes, Sr. was an American statesman, lawyer and Republican politician from New York. He served as the 36th Governor of New York , Associate Justice of the Supreme Court of the United States , United States Secretary of State , a judge on the Court of International Justice , and...
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 ConstitutionThe Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...
's
separation of powersThe separation of powers, often imprecisely used interchangeably with the trias politica principle, is a model for the governance of a state. The model was first developed in ancient Greece and came into widespread use by the Roman Republic as part of the unmodified Constitution of the Roman Republic...
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 ClauseThe Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...
.
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.
Specifically, the Court invalidated regulations of the poultry industry promulgated under the authority of the National Industrial Recovery Act of 1933, including
pricePrice fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
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 DealThe New Deal was a series of economic programs implemented in the United States between 1933 and 1936. They were passed by the U.S. Congress during the first term of President Franklin D. Roosevelt. The programs were Roosevelt's responses to the Great Depression, and focused on what historians call...
legislation between January 1935 and January 1936, and which ultimately caused Roosevelt to attempt to
pack the CourtThe Judicial Procedures Reform Bill of 1937, frequently called the court-packing plan, was a legislative initiative proposed by U.S. President Franklin Roosevelt to add more justices to the U.S. Supreme Court. Roosevelt's purpose was to obtain favorable rulings regarding New Deal legislation that...
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, which the National Recovery Review Board was already doing. Many of the labor provisions reappeared in the Wagner Act of 1935.
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