INDUSTRIAL POLICY

The NIRA

The first New Deal efforts to respond to corporate bankruptcies and the concomitant unemployment came in the form of an omnibus legislative bill. The National Industrial Recovery Act (NIRA) was passed by Congress in mid June 1933. An extremely complex bill, the NIRA was intended to stop the crippling deflation that was ruining American industries. The NIRA suspended antitrust laws and allowed industries to collude in setting prices. The NIRA created the Public Works Administration (PWA), and in its now-famous section 7(a) allowed workers to organize into unions with the assurance that they could not be "coerced, harassed, or intimidated" by their employers. The National Recovery Administration (NRA) was established under the NIRA to set codes for industrial compliance. Under the capable leadership of Hugh S.Johnson, the NRA instituted codes calling for minimum wages, maximum hours, and an end to child labor. Industries that complied with NRA codes were allowed to display a "Blue Eagle." Almost overnight the Blue Eagle and the accompanying slogan "We Do Our Part" were being displayed in factories and stores nationwide. In Philadelphia the owner of a new National Football League franchise even named his team the Eagles. In May 1935, however, the U.S. Supreme Court declared the NIRA unconstitutional. Congress extracted the labor provision of the NIRA, which, passed as the Wagner National Labor Relations Act of 1935, encouraging labor organization in the United States.

The Fair Labor Standards Act

One consequence of a reinvigorated labor movement was the passage in 1938 of the Fair Labor Standards Act. The law established for the first time a minimum wage for working people (initially twenty-five cents an hour) and, beginning in 1940, set the maximum workweek at forty hours.

THE NIRA AND AN "UNFIT CHICKEN"

The NIRA was a complex, multibillion-dollar federal law that based its authority on the inter-state-commerce clause of the U.S. Constitution. Ironically, this major piece of New Deal legislation was brought down by two poultry wholesalers from Brooklyn, New York. The Schechter brothers operated a chicken slaughterhouse under the provisions of Jewish dietary law. Kosher law, however, conflicted with the Live Poultry Code of the NIRA, and in April 1935 the Schechter brothers were found guilty of eighteen counts of conspiracy to violate the poultry code. In part the government charged that they were selling "an unfit chicken." In May the Schechters appealed their case to the U.S. Supreme Court, giving that body the opportunity to subject the entire NIRA to judicial review. As a result the court not only overturned the Schechter Poultry conviction on the grounds that the company was not engaged in interstate commerce, but it also ruled the entire NIRA unconstitutional. Chief Justice Charles Evans Hughes, delivering the majority opinion, argued that "extraordinary conditions do not create or enlarge constitutional power." Thus, the omnibus NIRA was defeated by The Sick Chicken Case.

Source:

Arthur M. Schlcsingcr Jr., The Politics of Upheaval, volume 3 of" his The Age of Roosevelt (Boston: Houghton Mifflin, 1960).

Sources:

Irving Bernstein, Turbulent Years: A History of the American Worker*1933-1941 (Boston: Houghton Mifflin, 1970);

Ellis W. Hawley, The New Deal and the Problem of Monopoly (Princeton: Princeton University Press, 1966);

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

John H. Leek, Government and Labor in the United States (New York: Rinehart, 1952);

Michael M. Weinstein, Recovery and Redistribution under the NIRA (New York: North-Holland Publishing, 1980).

INDUSTRIAL POLICY

Industrial policy refers to organized government involvement in guiding the economy by encouraging investment in targeted industries. Such policy serves to allocate capital across manufacturing industries by a system of taxes, subsidies, and investment incentives designed to move the economy along a specific pathway. Although an industrial policy was in place since the 1950s in many developed countries including Japan, Germany, France, and Sweden, it continued to be hotly debated in the United States toward the end of the twentieth century.

Japan's successful industrial policy drew a great deal of attention. In Japan the Ministry of International Trade and Industry (MITI) orchestrated directed development of selected industries and products which it deemed necessary for Japan to compete in the international market. MITI only assisted the private sector in targeted industries. It generally financed no more than 50 percent of a project, leaving the rest to the private sector and market influences. The MITI is not autonomous but is overseen by various government agencies. Japan's automobile industry served as a highly successful model where a specific industry was targeted to assume an expanded role in world markets.

Advocates for an industrial policy in the United States pointed to four major issues. First, since the law of supply and demand in world markets is greatly skewed by various measures employed by nations to help particular industries, the U.S. needed to do likewise to compete. Second, an industrial policy could help ease the social costs when industries lost their competitive advantage by assisting in retraining workers for new jobs. Third, industrial policy could ease "boom and bust" cycles by planning tax incentives to stabilize regions. Finally, the United States already protected certain industries and special interest groups but in a haphazard manner with no organized social goals; an organized program was believed to be more effective.

Opponents cited the market as the most efficient allocation of resources, insisting the government could not do a better job. Interfering in the market process was generally less accepted in the United States than in other countries.

See also: De-Industrialization

industrial policy government-sponsored economic program in which the public and private sectors coordinate their efforts to develop new technologies and industries. Government provides the financial support and capital to the private sector by direct subsidies, tax credits, or government-run developmental banks. Industrial policy emphasizes cooperation between government, banks, private enterprise, and employees to strengthen the national economy. In the 1980s and 90s, industrial policies enjoyed some success in Germany and Japan. In the United States, such direct government involvement in business planning has traditionally been viewed with suspicion. However, the Advanced Technology Program, begun in 1990, has been instrumental in the research and development of promising, high-risk technologies. U.S. government subsidies can also be found in such areas as defense, energy, transportation, and home construction.

Bibliography: See R. Reich, The Work of Nations (1991).