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National Industrial Recovery Act (1933)

National Industrial Recovery Act (1933)

James G. Pope

When Franklin D. Roosevelt was inaugurated in March 1933, almost 13 million workersabout 25 percent of the workforcewere 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 violatorthe 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 300,000by far the largest gain of any unionbut 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 (19211923), 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.

See also: Agricultural Adjustment Act; Fair Labor Standards Act; Farm Credit Act of 1933; National Labor Relations Act.

BIBLIOGRAPHY

Bellush, Bernard. The Failure of the NRA. New York: Norton, 1975.

Brand, Donald R. Corporatism and the Rule of Law. Ithaca, NY: Cornell University Press, 1988.

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

Hawley, Ellis W. The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence. Princeton, NJ: Princeton University Press, 1969.

Irons, Janet. Testing the New Deal: The General Textile Strike of 1934 in the American South. Urbana: University of Illinois Press, 2000.

Johnson, Hugh S. The Blue Eagle from Egg to Earth. New York: Greenwood Press, 1968.

Schlesinger, Arthur M., Jr. The Coming of the New Deal. Boston: Houghton Mifflin, 1959.

New Deal

Alfred L. Brophy

When Franklin Roosevelt ran for president in 1932, the United States was in the midst of the Great Depression. He told delegates at the Democratic Party's nominating convention in Chicago in July 1932 that "I pledge you, I pledge myself, to a new deal for the American people." Roosevelt was elected in a landslide in November and the legislation that followed known as the "New Deal." The legislation was designed to provide jobs and a social safety net, stimulate the economy, and regulate business.

The heyday of the New Deal was 19331938. During his first hundred days in office, Congress passed and Roosevelt signed legislation for the National Industrial Recovery Act (NIRA), the Civilian Conservation Corps (CCC), the Tennessee Valley Authority (TVA), the Emergency Farm Mortgage Act, the Federal Emergency Relief Act, the Glass-Stegall Banking Act, and the Agricultural Adjustment Act (AAA). The amount of legislation was staggering and subsequent presidential administrations are always measured against what they do in the "first 100 days." Later New Deal legislation included the National Labor Relations Act, Indian Reorganization Act, Rural Electrification Act, the Gold Standard Act of 1934, Walsh-Healy Act, and the Fair Labor Standards Act. Other legislation established such government agencies as the Security and Exchange Commission, Social Security Administration, the Farm Security Administration, and the Works Progress Administration.

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National Industrial Recovery Act

NATIONAL INDUSTRIAL RECOVERY ACT


National Industrial Recovery Act (NIRA) was the centerpiece of President Franklin D. Roosevelt's (19331945) initial New Deal programs that were aimed at reversing the economic collapse of the Great Depression. Enacted by Congress in 1933 during the president's First Hundred Days in office, the NIRA was designed to improve standards of labor, promote competition, reduce unemployment, and increase consumer's purchasing power. As the legislation went through Congress, it met with much debate and passed by a slim margin of seven votes.

Title I of the act attempted to accomplish the goals of the NIRA by creating the National Recovery Administration (NRA) to establish codes of fair competition, which were rules governing the wages, prices, and business practices of each industry. Representatives of firms in various industries joined NRA officials in drafting the codes. Although the codes were not intended to foster monopolies or discriminate against small business, applicable antitrust laws were temporarily suspended to prevent the NIRA from being challenged on grounds that it engendered unfair competition. Initially, the codes received wide public support, but over time that support diminished. Enforcement of the codes was limited, and the successes it did achieve, like the end of child labor in the textile industry, were eventually overshadowed by higher prices and limited production.

Title II of the act created the Public Works Administration (PWA) to award $3.3 billion in construction contracts for public projects. The PWA oversaw an enormous number of such projects, including the construction of schools, hospitals, post offices, courthouses, water systems, roads, bridges, and dams. The NIRA also included provisions for increasing minimum wages, limiting the hours in a workweek, and recognizing the right of labor to unionize and collectively bargain with management. Among the PWA's biggest successes are the construction of the Tirborough Bridge in New York City and the Hoover Dam in Arizona. Overall, the Public Works Administration completed 34,000 projects nationwide.

Three weeks before the NIRA's two-year expiration date in 1935, the U.S. Supreme Court unanimously declared the act unconstitutional. In the case of Schechter Poultry Corporation vs. the United States, the Supreme Court ruled that Congress had impermissibly delegated its legislative power to the National Recovery Administration. The NIRA ceased operations.

See also: Great Depression, National Recovery Administration, New Deal


FURTHER READING

Bailyn, Bernard, David Brion Davis, David Herbert Donald, John L. Thomas, Robert H. Wiebe, and Gordon S. Wood. The Great Republic: A History of the American People. Lexington, MA: D.C. Heath and Co., 1977.

Johnson, Paul. A History of the American People. New York: Harper Collins Publishers, 1997.

Kennedy, David M. Freedom from Fear: The American People in Depression and War, 19291945. London: Oxford University Press, 1998.

Ketchum, Richard M. The Borrowed Years 1938 1941: America on the Way to War. New York: Random House, 1989.

Manchester, William. The Glory and the Dream: A Narrative History of America 19321972. New York: Bantam Books, 1974.

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