National Recovery Administration

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NRA Blue Eagle stamps

The NRA (National Recovery Administration) was a key part of the First New Deal in 1933-35, until it was abolished by the Surpeme Court and never reestablished. 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 Act) under the general guidance of President Franklin D. Roosevelt and his top advisors. It allowed industries to create "codes of fair competition," which were intended to reduce destructive competition and to help workers by setting minimum wages and maximum weekly hours. Most economic historians consider the NRA to be a resounding failure with very little positive economic success.

The NRA, symbolized by the blue eagle 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 urged to be boycotted - making it seem mandatory for survival.

Its director was Hugh S. Johnson, a retired general and successful businessman. Johnson saw the NRA as a national crusade designed to restore employment and regenerate industry. Johnson was removed in 1934, In early 1935 the new chairman announced that the NRA would stop setting prices, but businessmen complained. Chairman Samuel 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." 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 in so far 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 employes 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.[1] ”

About 23,000,000 people worked under the NRA fair code. 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.

Pennock (1997) shaws 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 oppotunity 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.

The NRA came under attack from some businessmen, while others supported it. (Best 1991). Sniegoski (1990) shows that a major attack came from the left. The "National Recovery Review Board," headed by famed lawyer Clarence Darrow, was created by President Roosevelt in March 1934 and abolished by him that same June. During its brief existence, the board issued three reports highly critical of the NRA. The reports, which charged the NRA with fostering monopolies, were philosophically consistent in their advocacy of competitive capitalism and their denunciation of special privilege for big business. Although the NRA was attacked from other quarters at the same time, the small-business viewpoint of the Darrow board, supported by followers of Louis Brandeis in the New Deal, was a major factor in the NRA's demise.

In 1935, in the case of Schecter Poultry Corp. v. US, the Supreme Court declared the NRA as unconstitutional because it gave the President too much power.[2] The NRA quickly stopped operations. Some of the the labor provisions reappeared in the Wagner Act of 1935 and the minimum wage act of 1937.[3]

External links

Bibliography

  • Alexander, Barbara J. "Failed Cooperation in Heterogeneous Industries under the National Recovery Administration." Journal of Economic History, 1997 57(2): 322-344. Issn: 0022-0507 Fulltext: in Jstor
  • Best; Gary Dean. Pride, Prejudice, and Politics: Roosevelt Versus Recovery, 1933-1938. Praeger Publishers. 1991 online edition
  • Brand, Donald R. "Corporatism, the NRA, and the Oil Industry." Political Science Quarterly 1983 98(1): 99-118. Issn: 0032-3195 Fulltext: in Jstor. Uses corporatism model to explore the struggle between independent oil producers and major oil producers over production and price controls.
  • Hawley, Ellis W. The New Deal and the Problem of Monopoly Princeton UP (1968)
  • 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
  • Charles L. Dearing, Paul T. Homan, Lewis L. Lorwin, Leverett S. Lyon. The ABC of the NRA, (1934) 200 pgs. online edition
  • Ohl, John Kennedy. Hugh S. Johnson and the New Deal (1985), academic biography.
  • Pennock, Pamela. "The National Recovery Administration and the Rubber Tire Industry, 1933-1935." Business History Review," 1997 71(4): 543-568. Issn: 0007-6805 Fulltext: in Jstor
  • Schlesinger, Arthur Meier. The Coming of the New Deal (1958) pp 87-176 online version
  • Sniegoski, Stephen J. "The Darrow Board and the Downfall of the NRA." Continuity 1990 (14): 63-83. Issn: 0277-1446
  • Storrs, Landon R. Y. Civilizing Capitalism: The National Consumers' League, Women's Activism, and Labor Standards in the New Deal Era, U of North Carolina Press, 2000 on consumer activism promoted by NRA; online edition
  1. ↑ "Dollar Men & Prices" Time (Jan 21, 1935) online
  2. ↑ The Supreme Court Historical Society.
  3. ↑ George E. Paulsen, "Ghost of the Nra: Drafting National Wage and Hour Legislation in 1937." Social Science Quarterly 1986 67(2): 241-254. Issn: 0038-4941
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